A computational approach to pricing a bank credit line

Autor:	Bryan Stanhouse, Al Schwarzkopf, Matt Ingram
Rok vydání:	2011
Předmět:	Economics and Econometrics Financial economics media_common.quotation_subject Probability density function Market liquidity Loan Cash Econometrics Economics Credit crunch Line (text file) Non-conforming loan Finance Brownian motion media_common
Zdroj:	Journal of Banking & Finance. 35:1341-1351
ISSN:	0378-4266
DOI:	10.1016/j.jbankfin.2010.10.002
Popis:	Using trended Brownian motion to characterize borrower cash needs over time, we are able to derive a probability density function for the time to depletion of a bank credit line as well as the likelihoods for the time to exhausting the sources of liquidity that fund the loan. Armed with these analytic results, we solve for the credit line mark-up rate and the configuration of stored liquidity that maximizes the bank’s intertemporal expected profits from the loan. The optimality conditions produce a system of integral differential equations whose solutions we then simulate over a host of scenarios.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::8ea5862cef879d3c5be529db8e7cc7f8 https://doi.org/10.1016/j.jbankfin.2010.10.002 Zobrazit plný text záznamu Full Text from ScienceDirect