<Para ID="Par1">We evaluate the expected loss and the standard deviation of loss of a bank loan, considering the bank’s strategic control of the expected return on the loan. Assuming that the bank supplies an additional loan to minimize the expected loss of the total loan, we provide analytical formulations...</para>

In this study, we derive an analytical solution for the expected loss and the higher moment of the discounted loss distribution for a collateralized loan. To ensure non-negative values for the intensity and interest rate, we assume a quadratic Gaussian process for the default intensity and...