Banks' assets are opaque, and therefore, we model their true accounting asset values as partially observed variables. We derive a stochastic control model to optimize banks' dividend and recapitalization policies in this situation, and calibrate that to a sample of U.S. banks. By the calibrated...

How should shareholders make dividend and recapitalization policies for a bank when there exists execution delay and fix costs on recapitalizations? What is the optimal time and magnitude of recapitalization if the magnitude of recapitalization is pre-determined at the time of...