Bank Capital Regulation in a Cap Option Framework

doi:10.1016/j.iref.2012.05.002

淡江大學機構典藏 > 商管學院 > 國際企業學系暨研究所 > 期刊論文 > Item 987654321/79684

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题名:	Bank Capital Regulation in a Cap Option Framework
作者:	Tsai, Jeng-Yan;Hung, Wei-Ming
贡献者:	淡江大學國際企業學系
关键词:	Cap options;Capital regulation;Bank interest margin;Equity volatility;Default risk
日期:	2013-01
上传时间:	2013-01-08 22:39:33 (UTC+8)
出版者:	Amsterdam: Elsevier BV * North-Holland
摘要:	Synergy-banking management under capital regulation is done through a gluing together of lending and deposit-taking. Under this viewpoint, we argue that the cap options theory of corporate security valuation can be applied to the contingent claims of the synergy-banking firm. The equity holders of the bank own a cap option on the bank equity return which can be considered against their expected investment opportunity costs captured by the cap rates. We show that an increase in the cap rate increases the risky loans held by the bank at a lower interest margin, and then increases the equity risk and the default risk of equity. An increase in the capital-to-deposits ratio decreases the risky loans held by the bank at an increased margin, and decreases the bank's equity risk and the default probability in the bank's equity. Capital regulation as such makes the bank more prudent and less prone to risk-taking, thereby contributing to the stability of the banking system. Our findings may support increased capital requirements in the spirit of the Dodd–Frank Act of the Basel Accord (Eubanks, 2010).
關聯:	International Review of Economics & Finance 25, pp.66–74
DOI:	10.1016/j.iref.2012.05.002
显示于类别:	[國際企業學系暨研究所] 期刊論文

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