Search Results
Conference Paper
The opening of new markets for bank assets
Working Paper
A structural model of contingent bank capital
This paper develops a structural credit risk model of a bank that issues deposits, shareholders' equity, and fixed or floating coupon bonds in the form of contingent capital or subordinated debt. The return on the bank's assets follows a jump-diffusion process, and default-free interest rates are stochastic. The equilibrium pricing of the bank's deposits, contingent capital, and shareholders' equity is studied for various parameter values haracterizing the bank's risk and the contractual terms of its contingent capital. Allowing for the possibility of jumps in the bank's asset value, as might ...
Working Paper
Estimating the cost of U.S. indexed bonds
A presentation of an equilibrium bond-pricing model driven by two stochastic factors: the real interest rate and the expected rate of inflation. The models parameters are estimated using a maximum-likelihood technique based on a Kalman filter.
Conference Paper
Banks and loan sales: evidence of implicit contracts
Conference Paper
Bank consolidation and consumer loan interest rates
Conference Paper
Market discipline, information disclosure, and uninsured deposits
Discussion Paper
Why Do Banks Target ROE?
Nonfinancial corporations focus on the growth in earnings per share (EPS) to benchmark their performance. Banks used to follow a similar practice, but starting in the late 1970s they began to emphasize return on equity (ROE) instead. In this blog post, we outline findings from our recent staff report, which argues that banks had an incentive to make this change when their charter values eroded owing to increased competition, and the incentive to change was magnified by risk-insensitive deposit insurance.