A Contingent Claim Approach to Bank Valuation

dc.contributor.authorOkedoye, Michael Akindele
dc.contributor.authorOwoloko, Enahoro Alfred
dc.contributor.authorOmoregbe, Nicholas Amienwan
dc.date.accessioned2024-04-19T11:16:41Z
dc.date.available2024-04-19T11:16:41Z
dc.date.issued2014
dc.descriptionJournal Article
dc.description.abstractIn 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.
dc.identifier.citationOwoloko, E. , Omoregbe, N. and Okedoye, M. (2014) A Contingent Claim Approach to Bank Valuation. Journal of Mathematical Finance, 4, 234-244. doi: 10.4236/jmf.2014.44020
dc.identifier.issn234-244
dc.identifier.urihttps://repository.fupre.edu.ng/handle/123456789/67
dc.language.isoen
dc.publisherScientific Research Publishing
dc.titleA Contingent Claim Approach to Bank Valuation
dc.typeArticle
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