Scholarly works in the Department of Mathematics

Permanent URI for this collection

https://repository.fupre.edu.ng/handle/123456789/19

Browse

Browsing Scholarly works in the Department of Mathematics by Author "Omoregbe, Nicholas Amienwan"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    A Contingent Claim Approach to Bank Valuation
    (Scientific Research Publishing, 2014) Okedoye, Michael Akindele; Owoloko, Enahoro Alfred; Omoregbe, Nicholas Amienwan
    In this paper, the model formulated incorporated stochastic variables such as bank loans and deposits as well as some deterministic variables: cash available, depreciation, capital expenditure, tax and costs, comprising variable costs and fixed costs. This paper assumes that the dynamics of bank loans and deposits at time t follow a geometric Brownian motion, therefore, it satisfies certain stochastic differential equations (SDEs) formulated on some probability space. On the other hand, the growth rate μL(t) in loan at time t, growth rate μD(t) in deposit at time t, and the variable cost η(t) at time t are assumed to be driven by mean-reverting Ornstein-Uhlenbeck processes. The SDEs of the dynamics of bank loans, growth rate in loans, bank deposits, growth rate in deposits and variable cost arising from the model were solved by means of the ItÔ Lemma. Discrete time approximations of the exact solutions of the SDEs were derived and used in a Monte Carlos simulation software.