reflect contemporaneous information about bank riskin the United States and in Europe.2 In our study, we firstexamine the …-to-noise ratio ofsubordinated debt spreads should be quite low far away fromthe default point of the bank. We then summarise the …

, however, the bank can readjust the level of risk after the deposit rate is contracted, market discipline leads to an increase …

spread of a bank by about two basis points. We further find that some banks have already reached a size that makes them too …

fixed income unless the value of the bank’s assets falls below a predetermined threshold. In such an event, the debt … obligation is automatically converted to the bank’s common equities. By using a contingent claims valuation approach we present … bank that includes DES or alternatively subordinated debt in its capital structure. We compare and evaluate quantitatively …

additional information about the value of bank assets relative to equity prices. The issues of the credibility of the proposed …