In recent decades nations around the world have experienced financial crisis. In some cases political leaders have contributed to the suddenness and magnitude of the crisis by initially providing overly optimistic assertions concerning the potential benefits of their financial liberalisation...

Purpose – The purpose of this paper is to highlight how the basic binomial option pricing model (BOPM) might be used by regulators to help formulate rules, prior to financial crisis, that help prevent loan overstatement by banks in emerging market economies undergoing financial crises....