THE ECONOMIC CAPITAL OF OPAQUE FINANCIAL INSTITUTIONS

The capital structure of firms that cannot hedge continuously is affected by the agency costs and the moral-hazard implicit in the contracts they establish with stockholders and customers. It is demonstrated in this paper that then an optimal level of capital exists, which is characterised in terms of the actuarial prices of the involved agreements. The capital principle so obtained extends the classic theoretical framework, sustained by the well-known proposition of Modigliani and Miller and the model of deposit insurance of Robert Merton, at the time that naturally integrates the financial and actuarial theoretical settings.