Bank regulatory design relies critically on bank risk modeling. Traditionally, the bank's aggregate value is assumed to obey an exogenously specified process (e.g., a lognormal diffusion). We demonstrate that this assumption is generally invalid given the truncated and correlated payoff...

Chen and Ritter (2000) documented that underwriter spreads for recent US initial public offerings (IPOs) in $20 million range as well as much larger IPOs in the $80 million range are clustered at 7%. This observation has led to a Department of Justice (DOJ) enquiry into potential price fixing by...

This article provides incentive compatible regulations that support fairly priced deposit insurance in a competitive banking industry. If informational asymmetry exists between the regulator and banks regarding loan quality, but the regulator can observe actual loan rates charged, then imposing...