Broll, Udo; Welzel, Peter; Kit, Pong Wong - 2016
We examine risk taking when the bank's preferences exhibit smooth ambiguity aversion. Ambiguity is modeled by a second … the case of greater ambiguity aversion. Given that the competitive bank's smooth ambiguity preferences exhibit non …-increasing absolute ambiguity aversion, imposing a more stringent capital requirement to the bank reduces the optimal amount of loans, if …