Liang, Xiaozhong - Society for Computational Economics - SCE - 2005
of constant interest rate in the basic model. Thus, the uncertainty of bank equity comes from two sources: capital ratio … and interest rate. I adopt a general form of term structure and find the numerical solution for the bank equity value as a … function of both asset-to-debt ratio and interest rate. Through the stochastic term structure, interest rate risk is also …