We study the effects of purchasing distressed loan on bank equity risk under the Legacy Loan Program (LLP), in which the government is in partnership with private investors. The bank may refuse LLP when its knock-out value is too low. When the bank decides to participate in the LLP, the...

A retrenchment in crossborder credit is under way, the product of both market forces and political pressure on international banks to lend at home (Economist, 2009). In addition, banks, particularly the largest, have also dramatically expanded their retail banking operations over the past few...

Since banks often lend via commitments, their lending and deposit-taking may be two manifestations of one primitive function: the provision of liquidity on demand. We explore this function under a cap-based valuation. We find that (i) the strike price of the cap-based valuation increases the...