bank spread with uncertain deposit level and risk aversion abstract this paper derives a model of the banking firm under uncertainty and risk aversion the selection of the bank s optimal spread between loan and deposit rates is emphasized the model s results provide some implications for bank asset quality capital regulation and deposit insurance for example it is shown that increases in the level of equity capital tend to increase the bank s spread under dara this implies an improvement in bank asset quality on the other hand as the deposit supply function becomes more volatile the bank s spread narrows which implies a decline in the quality of the bank s assets

allocation of fixed transmission cost to wheeling transactions by cooperative game theory this paper describes a methodology to allocate the cost of transmission network facilities to wheeling transactions in decentralized power systems the authors propose that the responsibility placed on transmission facilities involved in each transaction be according to the transmission usage pattern their proposal incorporates the mw mile method and considers economies of scale of transmission network facilities they also incorporate a nucleolus scheme in the cooperative game theory to deal with matters of conflict the applicability of their method is demonstrated in a numerical example

financial firm production of monetary services a generalized symmetric baroett variable profit function approach an alternative monetary production model of financial firms is employed to investigate supply side monetary aggregation financial firms are conceived to produce monetary services as outputs through financial intermediation a new method for testing the existence of consistent monetary output aggregates in financial firms production technology is developed in terms of a multiproduct firm s variable profit function and the method does not require homotheticity of the aggregator function we use a generalized symmetric barnett flexible functional form that specification satisfies global curvature conditions and retains its flexibility under the null hypothesis of weak separability neither of those properties is possessed by other flexible functional forms

the morning after explaining the slowdown in japanese growth in the 1990s abstract this paper uses a var to investigate four possible explanations of the extended slump in japanese economic activity over the 1990s the absence of bold and consistent fiscal stimulus the limited room for expansionary monetary policy due to a liquidity trap overinvestment and debt overhang and disruption of financial intermediation the results indicate that all of these factors played a role but that the major explanation is disruption in financial intermediation largely operating through the impact of changes in domestic asset prices on bank lending

transmission system management and pricing new paradigms and international comparisons the transmission system once the necessary but nearly invisible component of the electric power system is now the focus of physical electrical and financial attention of the utility and more significantly their potential suppliers customers this paper has three primary objectives the first is to present a discussion of a new paradigm for the electric power industry the second is to review transmission pricing options specifically those utilizing either long run lrmc or short run srmc marginal cost based approaches the third is to provide a review of innovative approaches to transmission asset management and finance as seen from international experience

can japan make a comeback fter being the best performer in the oecd during the preceding 40 years japan has experienced economic stagnation since the beginning of the 1990s what has happened to the japanese economy can it make a comeback as a fastgrowing economy what is required in terms of economic policy japan is the second largest economy in the world it is the largest or second largest importer of most raw materials and it owns more foreign assets than any other country what happens to the japanese economy is therefore of great importance not only for the japanese but also for the entire world

tariffs and load management the french experience the aim of an electric public utility is the optimum control of the electrical energy generating and consumption system consistency is required between the means of control at level of supply and the means of control at level of demand on the demand side marginal cost pricing is an efficient tool to achieve a good management this paper presents the french experience in this field

utility cogenerator game for pricing power sales and wheeling fees the authors have studied an extensive game model of an electricity market where a cogenerator sells excess electricity to an electric utility or to an end user they found that a buy back system the utility purchases cogenerated power is as efficient as a cogenerator customer wheeling system and that these two systems are more desirable than a monopoly system for the regulator the buy back rate should be equal to lp bargaining solution or less than nash bargaining solution the marginal cost of the electric utility they also conducted an analysis of a two period electricity market in which they found that the cogenerator that can supply excess power during peak period obtains the market advantage

intelligent agents for negotiations in market games i model in competitive markets human decision makers need assistance to determine potential coalitions that they can be part of note that such coalitions are legal provided market power is not monopolized we present an approach for designing specialized intelligent software agents that perform negotiations on behalf of their human counterparts and then suggest market strategies that the human can adopt our negotiation protocol is derived from cooperative game theory however it differs from the game theory literature in requiring virtually no trustworthy information exchange between the potential coalition partners in this paper we present the negotiation model

optimal pricing in electrical networks over space and time an electrical system is modelled with a transmission network customers central generators and independent generators the system is subject to stochastic failures and stochastic demand parameters optimal spot prices are derived for the system they vary stochastically with space and time and depend on electrical load flow patterns the price difference between two locations or two voltage levels and the wheeling charge between them will change magnitude and sometimes sign over time as a function of events throughout the network current spatial pricing methods are significantly different from the spot price based methods derived here

optimal pricing of non utility generated electric power the importance of an optimal pricing policy for pricing nonutility generated power is pointed out in this paper an optimal pricing policy leads to benefits for all concerned the utility industry and the utility s other customers in this paper it is shown that reliability differentiated real time pricing provides an optimal nonutility generated power pricing policy from a societal welfare point of view firm capacity purchase and hence an optimal price for purchasing firm capacity are an integral part of this pricing policy a case study shows that real time pricing without firm capacity purchase results in improper investment decisions and higher costs for the system as a whole without explicit firm capacity purchase the utility makes greater investment in capacity addition in order to meet its reliability criteria than is socially optimal it is concluded that the nonutility generated power pricing policy presented in this paper and implied by reliability differentiated pricing policy results in social welfare maximizing investment and operation decisions

insuring banks against liquidity shocks the role of deposit insurance and lending of last resort it has long been recognized that banks simultaneous provision of monitoring and liquidity services is advantageous but leaves them susceptible to liquidity shocks that may culminate in a system failure because a system failure is costly this provides a rationale for adopting arrangements including a lender of last resort and deposit insurance di to insure banks against liquidity shocks these arrangements have proven themselves very successful but they have also been the source of problems researchers have identified some of the main sources of these problems and have suggested ways to improve the design of these arrangements but there are still many issues that remain unaddressed this paper reviews the literature on the two arrangements that most countries have adopted to insure banks against liquidity shocks a lender of last resort and di and compares the design of these arrangements across countries the paper ends with a brief summary of the key lessons learned about the design of these arrangements and the issues related to them that remain unaddressed copyright blackwell publishers ltd 2006

optimal futures positions for large banking firms in this paper we extend earlier work on hedging models so that uncertainty about both deposit supply and loan demand is incorporated as well as random rates of return on loans and cd s our model suggests that the optimal forward position is the sum of three ratios that should be estimated simultaneously using bank specific data the optimal hedge ratios are estimated in both the pre deregulation and deregulation subperiods our results show that previous studies of bank hedging with interest rate futures have greatly overstated a the volume of short futures positions that banks should take and b the degree of homogeneity of optimal hedge ratios across the banking system similarly deregulation has not uniformly affected the interest rate risk borne by different institutions as the financial futures markets have matured there has been increased interest in the use of these markets to hedge the risks faced by financial intermediaries the literature on hedging with financial futures has grown dramatically with studies by ederington 4 franckle 5 schweser cole and d antonio 17 arak and mccurdy 2 dew and martell 3 picou 13 ho and saunders 6 koppenhaver 8 and morgan and smith 9 10 with the exception of some of the more recent work most articles that have addressed the use of financial futures have described the hedging problem as a relatively simple risk management situation even studies that have focused on intermediaries have viewed the hedging problem as one dimensional the intermediary wants either to hedge a cash position in a security such as a t bill or to hedge an anticipated issue of a cd this viewpoint does not incorporate the complexity of the situation faced by intermediaries or other firms that may be subject to uncertainty from a variety of sources the more recent literature incorporates some of this additional uncertainty by considering quantity risk in lending partial takedown of loan commitments or deposits for which the intermediary acts as a rate setter seldom are both sources of uncertainty incorporated in the same model for example koppenhaver 8 allows for quantity uncertainty in deposits and in the rate that the intermediary will pay on cd s but not for uncertainty in loan rates or loan quantity morgan and smith 9 allow for uncertainty in loan quantity but not in deposit supply in this paper we extend koppenhaver s 8 model and that of morgan and smith 9 so that uncertainty about both deposit supply and loan demand is incorporated as well as random rates of return on loans and cd s

term structure intermediation by depository institutions abstract term structure intermediation in which institutions purchase assets and sell liabilities of different maturities is analyzed theoretically and the results are applied to current policy issues the theoretical model allows the identification of alternative reasons for mismatched portfolios including risk loving utility functions interest rate forecasts that differ from the market s forward rates and risk premia in the yield curve the risk premia case appears empirically relevant and intermediation in which lending is long earning the risk premium and borrowing is short not paying a risk premium may offset capital market imperfections but such intermediation is also risky creating a dilemma for bank regulators

intelligent agents for negotiations in market games 2 application for part i see ibid vol 13 no 5 p 1103 8 1998 in competitive markets human decision makers need assistance to determine potential coalitions that they can be part of note that such coalitions are legal provided market power is not monopolized we present an approach for designing specialized intelligent software agents that perform negotiations on behalf of their human counterparts and then suggest market strategies that the human can adopt our negotiation protocol is derived from cooperative game theory however it differs from the game theory literature in requiring virtually no trustworthy information exchange between the potential coalition partners in the part i we presented the negotiation model in this paper we apply it to power markets

alternative models of spatial competition the concept of a spatial price equilibrium underlies most studies of spatial movement and competition however this concept is based upon a notion of perfectly competitive markets that is often unrealistic for many markets such as the markets for oil and coal and ignores the existence of local spatial monopolies this paper presents alternative economic models of spatial competition and shows how all of these models can be solved with essentially the same solution algorithm specifically after reformulating the classical spatial price equilibrium model and two extensions of takayama and judge s monopoly model we state and analyze a cournot nash model and discuss solution algorithms we then generalize these models and algorithms to multiple commodities and networks with transshipment nodes we conclude with a brief discussion of possible extensions of this class of models and associated algorithms

the organizational economics of power brokers and centrally dispatched power pools introduction economic and the political or normative components of pool structure power pools are partnerships among corporately unaffiliated electric utility compansubsidy free cost allocation ies formed to realize cost savings through mutual cooperation there are many ways in solutions to the first organizational probwhich cooperation can reduce the collective lem are described as tight or loose fedcosts of the utilities in a region including joint eral energy regulatory commission 1981 system planning and emergency energy excramer and tschirhart 1983 in some rechange but one aspect of cooperation is comgions of the united states particularly in the mon to all power pools within a geographinortheast individual firms have yielded subcal region and at any given time some utilities stantial amounts of authority over their own typically experience higher short run margeneration facilities establishing computerginal costs than others owing to differences of controlled dispatching of the region s plants plant mix or instantaneous loads when the regardless of ownership to realize the greatest firms with low marginal costs increase their reduction in energy costs in other regions production and sell this economy energy to notably florida utilities have chosen to retain the higher cost firms the poolwide cost of their autonomy and institute an information generation is decreased ertclearinghouse or energy broker to facilitate owing to this opportunity for cost savings short run power transactions that reduce the the firms in a region are confronted with an pool s energy costs cohen 1982 no matter organizational problem having two compowhat organizational form is used a pool must nents 1 what should the firms do to realize also agree on a method to allocate the costs of the opportunity for savings and 2 how pooled production and experience has should the savings be allocated among the shown that the matter of determining an pool members the first question is technical equitable allocation of system costs can be solved by accounting for the costs of producone of the principal impediments to the fortion and the costs of transaction under altermation and maintenance of power pooling native organizational arrangements cramer agreements uri 1976 federal energy reguand tschirhart 1983 gegax and tschirhart latory commission 1981 1984 the second is normative and must be recently economists have taken an interanswered in terms of the notions of justice or est in the equity properties of alternative cost fairness held in common by pool members allocation mechanisms the equity concept the solution of the organizational problem employed in most studies is the notion of therefore requires a political economy subsidy freedom faulhaber 1975 taken framework for organizational analysis zald from cooperative game theory an allocation 1970 in which attention is given to both the of a power pool s generation costs is subsidy free if no individual or subgroup of pool mem

application of games with incomplete information for pricing electricity in deregulated power pools the authors present a game theory approach to the problem of pricing electricity in deregulated marketplaces they assume that an independent operator receives bids by pool participants and defines transactions among participants by looking for the minimum price that satisfies the demand in the pool the competition among pool participants is modeled as a noncooperative game with incomplete information they assume that each pool participant knows its own operation costs but does not know his opponents operation costs the game with incomplete information is transformed into a game with complete but imperfect information and solved using the nash equilibrium idea the approach presented in this paper is geared towards providing support for pricing electricity in deregulated pools

nash equilibrium bidding strategies in a bilateral electricity market this paper examines bidding strategies in a bilateral market in which generating companies submit bids to loads a load accepts electricity delivery from the generator with the lowest bid at its bid price as long as this price is not higher than the load s willingness to pay necessary and sufficient conditions of nash equilibrium ne bidding strategy are derived based on a generic generating cost matrix and the loads willingness to pay vector the study shows that in any ne efficient allocation is achieved furthermore all nash equilibria are revenue equivalent for the generators based on the necessary and sufficient conditions this problem is formulated as an optimal assignment problem network optimization techniques are applied to calculate ne bid prices for the generators

allocation of unit start up costs using cooperative game theory this paper discusses a three part generation offer strategy that enables generators to put in unbundled variable operating costs and fixed start up no load costs we then propose methods based on cost sharing axioms to allocate fixed start up no load costs among electricity consumers load retailers that take into account equity and rationality considerations we focus on the single period cost allocation first we apply three well known game theoretic axioms the core the nucleolus and the shapley value we discuss the relative merits and demerits of each criterion and also explore certain theoretical conditions for the existence of the core and the shapley value lying inside the core finally the multiperiod start up cost allocation problem is studied allocations based on individual periods vis a spl grave vis composite allocation for all periods are compared and contrasted numerical examples are used to illustrate all theoretical concepts

the evolution of a free banking system the institutional features of models of unregulated monetary systems have often been arbitrarily and implausibly assumed this paper instead provides realistic grounding for important features by constructing a logical evolutionary account of free banking sophisticated and orderly arrangements are shown to emerge from competition and the pursuit of less costly methods of payment the emergence of standardized commodity money is followed by the development in turn of basic money transfer banking easily transferable bank liubilities and clearinghouses the features of an evolved free banking system differ from those assumed in recent models of competitive payments systems

maturity intermediation and intertemporal lending policies of financial intermediaries this paper considers the maturity intermediation and intertemporal lending decisions of risk averse financial intermediaries in particular the maturity mismatch problem and the fixed versus variable rate lending decision are modeled when the major source of risk involves uncertain future interest rates the results imply that the strategy of matching the maturity of assets and liabilities is not generally optimal or even minimum risk this is due primarily to the built in hedge that the intermediary has as a result of rolling over short term loans while continuing to finance long term loans intertemporal dependencies between loan demand and costs or both also have an effect on the optimal degree of maturity mismatching and provide one rationale for making loans at rates below current marginal cost

the impact of loan prepayment risk and deposit withdrawal risk on the optimal intermediation margin abstract numerous studies have analyzed how a bank s intermediation margin varies with respect to such factors as credit quality funding risk bank capital deposit insurance and other factors however these studies ignore the potential that loans tend to prepay if interest rates decline and deposits tend to be withdrawn if interest rates rise taking this very fundamental fact into account we derive optimal loan rates and deposit rates when the bank is subject to loan prepayments and deposit withdrawals among other things we find that greater volatility of interest rates tends to increase the margin the strength of the correlation between the level of interest rates and the propensity to prepay loans withdraw deposits also plays an interesting role

an instantaneous control model of bank reserves and federal funds management abstract empirical evidence indicates that large banks are generally net buyers of federal funds while small banks tend to be net sellers asymmetric information bank monopoly power or risk aversion arguments have been offered for this phenomenon however these models do not address the close link between bank reserves and federal funds purchases as alternative means of liquidity management our stochastic control model focuses on this link and has three main implications 1 it analyzes interaction between the above mentioned influences 2 it identifies three additional reasons for banks federal funds activity and 3 it examines the transmission of monetary policy in a dynamic framework

reliability differentiated pricing of spinning reserve this paper derives the spinning reserve pricing policy implied by the reliability differentiated pricing model and illustrates the importance of such a pricing policy the purchase of additional spinning reserve capacity at the prices derived leads to benefits for the customers through reduced real and reactive power prices and improved reliability of the power system and for the power system as a whole through reduced societal costs and less investment in system reinforcements the magnitudes and behavior of the optimal prices for real and reactive spinning reserve are illustrated in two case studies one case study determines reliability differentiated prices of real and reactive power for a sample four area power system with and without spinning reserve purchase and the optimal purchase prices for both real and reactive power spinning reserve capacities the results of this case study show that when reliability differentiated pricing is extended to both real and reactive power reserve it leads to benefits for customers and the power system as a whole a second case study examines the locational dependence of optimal prices for real and reactive reserves on the operating status of equipment in the 24 bus ieee reliability test system it is concluded that even small amounts of reliable reserve capacity purchase from neighboring electric utilities can improve the reliability of the power system and lower expected real and reactive power prices leading to gains in social welfare

using game theory to analyze electric transmission pricing policies in the united states abstract us public policy towards the private electric power industry is moving away from restrictive regulation and towards promotion of competition alternative policies concerning access to and pricing of transmission are now being discussed similar issues may arise in europe as trade barriers fall our purpose is to show how game theory can help illuminate that debate and identify desirable policies game theory models are used to estimate the possible effects of various policies upon productive efficiency and the distribution of gains among sellers transmitters and buyers of power static cooperative models are used to calculate the possible outcomes of short run transmission games long run games in which the amount of transmission capacity is a decisition variable are modeled as dynamic noncooperative stackelberg games one conclusion is that under some conditions price regulation and mandatory access could hurt power buyers by removing incentives for building transmission capacity another conclusion is that under a system of voluntary access and price regulation it may be better to allow wheeling prices to exceed the marginal cost of transport rather than to risk losing the benefits of cooperation

electric power system planning under time of use rates investment decisions under time of use rates and their relationship to utility system planning are examined optimal investment and price under social welfare maximization are derived and compared with the results of static analyses for a multiplant case the optimal pricing and investment policy are characterized by a plant of lower cost in a wide range of cost parameters it is found that the second best price the so called ramsey price is higher than the best price by an amount proportional to the ratio of deficit to revenue of an electric utility

how does equity capital cost affect bank performance during a financial crisis this article theoretically examines how equity capital cost affects return performance and safety of a bank and how this effect varies across a financial crisis comparing to a normal time when the bank manager s performance reveals the like of higher equity return and the dislike of higher equity risk we derive two main results first an increase in the bank s equity capital cost from an increase of the interest rate of the federal funds results in a reduced loan risk taking at an increased optimal bank interest margin implying better bank performance second by ignoring the dislike we find that the better performance is reinforced during a financial crisis but is reduced during a normal time financial crises and the dislike preference as such contribute a relatively low return and the stability of banking activities

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

data envelopment analysis truncated regression and double bootstrap for panel data with application to chinese banking we investigate the impact of earning asset diversification on chinese bank efficiency from 2006 to 2011 we do this by adapting the current two stage data envelopment analysis approach to a panel data setting so that we can account for technology change over time our monte carlo experiments illustrate the advantages and disadvantages of the proposed new algorithm over the conventional approach when applied to chinese banking data the regression results reveal that increasing the asset share of other earning assets including securities and derivatives is positively associated with bank efficiency decreasing the share of nonearning assets in total assets or increasing total equity has a similar impact our results also suggest that financial reforms currently being undertaken in china including removing the regulatory requirement concerning the ratio of loans to deposits a draft amendment to the existing commercial banking law and interest rate liberalization a proposed draft amendment are likely to have a positive effect on bank efficiency in china

game theory approach to use of noncommercial power plants under time of use pricing the authors use the game theory approach for evaluating the impact of the introduction of customer owned noncommercial power plants ncp when time of use pricing is used various results from this analysis are derived some of which are that the conflict between ncp customer and the supplier forces the supplier to reduce the price of ncp customers perception of the situation in which they are involved in plays an important role in this conflict the game model analysis presented provides a detailed quantitative information on electricity prices and on the ways of using ncp

optimal electricity supply bidding by markov decision process the bidding decision making problem is studied from a supplier s viewpoint in a spot market environment the decision making problem is formulated as a markov decision process a discrete stochastic optimization method all other suppliers are modeled by their bidding parameters with corresponding probabilities a systematic method is developed to calculate transition probabilities and rewards a simplified market clearing system is also included in the implementation a risk neutral decision maker is assumed the optimal strategy is calculated to maximize the expected reward over a planning horizon simulation cases are used to illustrate the proposed method

a continuous strategy game for power transactions analysis in competitive electricity markets this article presents a game theory application for analyzing power transactions in a deregulated energy marketplace such as poolco where participants especially generating entities maximize their net profits through optimal bidding strategies i e bidding prices and bidding generations in this article the electricity market for power transactions is modeled as a noncooperative game with complete information where the solution is determined in a continuous strategy domain having recourse to the nash equilibrium idea in order to provide more apprehensible analysis we suggest a new hybrid solution approach employing a two dimensional graphical approach as well as an analytical method finally the proposed approach is demonstrated on a sample power system

variable rate deposit insurance a re examination abstract this paper investigates the impact of variable rate deposit insurance on the financial and real sectors of the economy and its role as an absorber of bankruptcy risk within these sectors a variable rate system raises the cost of funds to the real sector and increases probability of bankruptcy of the borrowing firms when such bankruptcies occur society experiences a dead weight loss we argue that appropriate deposit insurance pricing must weigh the social costs connected with both financial firm failure and real sector bankruptcy

single equation multiple regression methodology is it an appropriate methodology for the estimation of the structure performance relationship in banking abstract tests of the structure performance paradigm of the industrial organization literature have been carried out almost exclusively using a single equation multiple regression methodology the purpose of this paper is to suggest that where the firms being considered are multiple product in nature and may pursue objectives in addition to maximizing the value of the firm such a methodology may be inappropriate the results presented in this paper suggest that the absence of a consistently strong positive and statistically significant relationship between market concentration and bank profitability may be traced in part to such an inappropriate methodology

tax policy and consumer spending evidence from japanese fiscal experiments abstract this paper studies the extent to which the impact of tax policy on consumer spending differs between temporary and permanent as well as anticipated and unanticipated tax changes to discriminate between them we use institutional information such as legal distinction between temporary and permanent tax changes as well as timing of policy announcement and implementation we find that the impact of temporary changes is significantly smaller than the impact of permanent changes we also find that more than 80 percent of japanese consumers including those who distinguish between temporary and permanent tax changes respond to tax changes at the time of their implementation and not at the time of a policy announcement we suggest an interpretation that these consumers follow a near rational decision rule

risk in banking and capital regulation this paper investigates the role of bank capital regulation in risk control it is known that banks choose portfolios of higher risk because of inefficiently priced deposit insurance bank capital regulation is a way to redress this bias toward risk utilizing the mean variance model the following results are shown a the use of simple capital ratios in regulation is an ineffective means to bound the insolvency risk of banks b as a solution to problems of the capital ratio regulation the theoretically correct risk weights under the risk based capital plan are explicitly derived and c the theoretically correct risk weights are restrictions on asset composition which alters the optimal portfolio choice of banking firms the recent increase in bank failures especially after the 1980 and 1982 deregulatory acts has again ignited a controversy over the risk portfolio of the banking industry given the importance of this sector there has been increased scrutiny of the industry s motives for risk taking and possible regulatory changes to improve its stability these investigations have centered around two rather complementary areas the first of these is the role of deposit insurance and how its current pricing procedure encourages risk taking and justifies current bank regulations the works of buser chen and kane 4 kane 9 and benston et al 2 have made substantive contributions the authors demonstrates the way in which our current fixed rate insurance system rewards risk taking by the firm and insulates it through deposit insurance from the market discipline that needs to exist to ensure proper risk evaluation this realization has led these authors to propose a series of regulatory changes to encourage proper portfolio choice within the industry these include a shift to market value accounting risk based deposit insurance premiums and additional capital regulation the last of these serves as a method of coinsurance whereby higher capital levels require the bank to absorb greater losses in the event of failure and encourage additional prudence in management in essense it is one method of risk reduction that may offset the risk preference imposed on the industry due to the inappropriate insurance pricing because the amount of capital influences the probability of bank insolvency and thus the soundness of the entire banking system the regulators ceteris paribus prefer more capital to

the credit crunch in east asia what can bank excess liquid assets tell us abstract the paper proposes a two step approach to assess the extent to which the fall in credit in crisis stricken east asian countries was a supply or demand induced phenomenon the first step is based on the estimation of demand function for excess liquid assets by commercial banks such a function is derived analytically in the first part of the paper the second step consists of establishing dynamic projections for the periods following the crisis and assessing whether or not residuals are large enough to be viewed as indicators of involuntary accumulation of excess reserves results for thailand indicate that the contraction in bank lending that accompanied the crisis was the result of supply factors

detrending stylized facts and the business cycle the stylized facts of macroeconomic time series can be presented by fitting structural time series models within this framework we analyse the consequences of the widely used detrending technique popularised by hodrick and prescott 1980 it is shown that mechanical detrending based on the hodrick prescott filter can lead investigators to report spurious cyclical behaviour and this point is illustrated with empirical examples structural time series models also allow investigators to deal explicitly with seasonal and irregular movements that may distort estimated cyclical components finally the structural framework provides a basis for exposing the limitations of arima methodology and models based on a deterministic trend with a single break

venture capital contracting under asymmetric information abstract a model is developed wherein entrepreneurs and venture capitalists contract under symmetric information asymmetric information may arise following first contracting it is shown this can lead to debt infeasibility and preferred equity usage control is linked to choice between common and preferred results are robust to multiperiod extensions roles of convertible preferred retained equity and debt in ipos are considered an empirical survey of venture capital firms is presented demonstrating preferred dominates in early financing debt and common are used far less generally at later stages under lower probability of asymmetric information these results agree with the theory s implications

loan commitment contracts terms of lending and credit allocation this paper analyzes the structure of loan commitment contracts and the interrelationships among their component parameters lenders offer borrowers a set of loan packages from which the latter may choose that package found to be most appealing borrowers may trade off changes in any loan parameter in exchange for other adjustments the borrower at this time may purchase a larger credit ration for a price supporting empirical evidence is presented recently researchers have begun to study the determinants of loan commitment or line of credit contracts such contracts play an extremely important role in bank credit allocation according to the federal reserve bulletin over 70 of u s commercial and industrial loans are made under loan commitment contracts given the central importance of the institution it is not surprising that it is the subject of a growing literature loan commitment contracts have importance both at the micro level in terms of the bank customer relationship and at the marco level in terms of the channels of operation of monetary policy in this paper we seek to present and test empirically an analytic model of loan commitment contracts our paper differs from most previous work in that we include empirical analysis of credit allocation moreover most previous theoretical work on the subject has concentrated on the specific issue of pricing of the contracts often using an approach based on option theory and not on the quantity allocation of credit and its determinants we are particularly interested in the determinants of the quantitative allocation of credit to bank customers and in the composition of and trade offs among the various parameters comprising such a loan commitment package our model helps explain how contract terms are established in the market and will illuminate the institutional framework of commercial lending a view of the credit contract as a package of loan terms has been implied recently in connection with the credit rationing problem studies by azzi and cox 21 arzac schwartz and whitcomb 11 and koskela 81 show that the

regulatory reform in european banking abstract a stylized model of the role of banks in a context of imperfect financial markets where the potential for market failure exists is proposed the specificity of banking is analyzed and the need of regulation explained the study of regulatory responses highlights the importance of their associated side effects particular attention is devoted to the interaction of regulation and competition in a strategic context the effects of deregulation and european integration of financial markets on banking competition are dealt with in the proposed framework

local government spending multipliers and financial distress evidence from japanese prefectures we estimate local government spending multipliers using annual data for 47 japanese prefectures during the 1990s our main findings are as follows the average local government spending multiplier is positive and significantly different from zero but not larger than one there are large and significant differences in the output effects of different types of government expenditures transfers to firms have the highest multiplier significantly larger than one while transfers to households have the lowest multiplier significantly below zero firms financial distress has a significant negative effect on the local government spending multiplier in contrast to economic slack that has a significant positive effect

financial innovation new assets and the behavior of money demand abstract two fundamental changes in us banking regulations have affected the behavior of money demand m1 the first authorized checkable deposit accounts paying explicit interest rates the second allowed these rates to be market determined the theoretical literature does not directly address the impact of these events suggesting that they are primarily an empirical issue however the empirical literature has yet to agree on the impact of financial innovation on money demand for example several studies report an increase in the elasticity of money demand several others report a decline this paper uses a lancaster type choice model to analyze formally the expected impact of these two changes on the demand for money the model derives specific conditions under which i the demand for money increases as new assets are introduced and ii the impact of either the introduction of new assets or the elimination of interest rate restrictions on the elasticity of money demand

to be different or to be the same it s a question and theory of strategic balance this paper addresses the performance consequences of firm level strategic similarity past research observed that firms face pressures to be different and to be the same by differentiating firms reduce competition by conforming firms demonstrate their legitimacy both reduced competition and legitimacy improve performance this paper begins building a theory of strategic balance by synthesizing the differentiation and conformity perspectives the theory directs attention to intermediate levels of strategic similarity where firms balance the pressures of competition and legitimation empirical support for the theory is found in a longitudinal study of commercial banks several suggestions for developing a theory of strategic balance conclude the paper the theory s major implication is that firms should be as different as legitimately possible copyright 1999 john wiley sons ltd

on matching book a problem in banking and corporate finance in each of the asset and liability markets in which the banking firm is an intermediary typically there are instruments with differing maturities the bank matching book problem is to manage the term structures of assets and liabilities in our first model the bank borrows and lends only short run in our second model the bank borrows only short run but can lend short run and long run the criterion in both models is the expected value of the present value of dividends issued both models yield dynamic programming problems broad aspects of optimal policies are indicated

transaction analysis in deregulated power systems using game theory the electric power industry is in transition to a deregulated marketplace for power transactions in this environment all power transactions are made based on price rather than cost a regional power pool is noted as the most straightforward path to a deregulated electricity marketplace however many questions remain unanswered regarding the economics of power pool participation in a deregulated energy marketplace participants are interested in maximizing their own profits regardless of the system wide profits it is perceived that competition will reduce the price of electricity for retail customers however the key issue for participants is related with the price definition to remain competitive in this paper the authors use game theory to simulate the decision making process for defining offered prices in a deregulated environment the outcome of this study may be used by power pool coordinators to discourage unfair coalitions a modified ieee 30 bus power system is used as a deregulated power pool to illustrate the main features of the proposed method

modeling the banking firm a survey this paper reports on the status of the literature on micro bank modeling and assesses our understanding of the banking firm s optimal behavior this is no mean task for much has been written on banking broadly defined over the past couple of decades the review is developed in pieces each major subproblem is outlined and the analysis used to deal with the issue explicated this is not the best way to summarize the development of a field it should be immediately recognized one would prefer to have a smooth continuum of development moving the frontier of knowledge evenly through time and across subareas yet this is rarely the way a field develops more likely individual questions attract attention and are the subjects of a substantial number of contributions after a time the field moves on to the new area of interest the banking field is no exception before embarking upon the review however a couple of lines should be devoted to previous attempts there have been essentially three first pyle 1972 analyzes the uncertainty portfolio models at a time when little existed in the literature and hence one finds the review a bit vague and sketchy baltensperger s contributions 1978 1980 are the next serious and rather extensive reviews the quality of these

interest rates and bank portfolio adjustments abstract we test empirically to determine if the relation between banks portfolio of assets and liabilities and interest rate is stable several possible causes of instability are considered the econometric techniques employed allow for continuous change in the structure of the empirical model in all cases stability of the model is strongly rejected we find that the portfolio interest rate relationship depends on the level of interest rates and exogenous assets as well as their rate and direction of change

bank liquidity providing in a real synergy management under a cap based valuation 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 bank s liquid asset holdings by increasing its loan rate and loan commitment rate with the strategic rate adjustment complements and decreases the bank s external finance need by increasing its deposit rate when the bank realizes a less risky state of the world and ii the number of caplet days decreases the bank s liquid asset holdings by decreasing its loan rate and loan commitment rate with the strategic rate adjustment complements and the strategic timing substitutes and increases the bank s external finance need by decreasing its deposit rate with the strategic timing substitutes when the bank realizes a more risky state our findings provide alternative explanations concerning the bank s liquidity funct

certain considerations in the pricing of transmission service a utility b intervening between utilities a and c such that lambda sub a lambda sub b lambda sub c might implicitly choose to price the transmission service for wheeling power from a to c according to three concepts called attitudes these attitudes franchise entitlement and simultaneous purchase and set are defined and a nondimensional normalized method of evaluating the economic benefits accruing from their use are discussed in detail the pricing of transmission service over the short term typically for the hourly or weekly exchanges of economy energy and interruptible energy is discussed the opportunity for the intermediate utility in the market are examined

fiscal stimulus effectiveness in japan evidence from recent policies abstractthis article examines the effects of japanese fiscal policy after the 2008 global financial crisis using a mixed vector autoregression event study approach we focus on the effects of stimulus packages with environmental benefits the empirical results show that a tax break and subsidy programme designed to promote the adoption of eco friendly cars helped stimulate automobile production while a similar programme intended to promote the purchase of energy efficient appliances had no effect on appliance production

optimal multi area wheeling an important consideration in wheeling is where a transaction involves several parties that is multi area wheeling power from seller to buyer flows through several intermediate utilities each utility represents an individual control area engaged in part of a more complex wheeling transaction individual wheeling rates then have to be computed for each area the question of how much energy should be transported through each path and what wheeling price should be paid is then an issue of importance this is formulated as a nonlinear optimisation program with linear constraints and solved by a gradient projection method the availability of facts capability to implement the optimal wheeling strategy once determined is assumed in this paper

bank behavior interest rate determination and monetary policy in a financial system with an intraday federal funds market abstract this paper has two purposes one is to construct a formal model of the determination of and relationships between interest rates on funds with 24 hour overnight and intraday terms the second is to use this model to examine the likely effects of alternative federal reserve proposals for addressing the issue of intraday extension of federal reserve credit in the form of daylight overdrafts of bank reserve accounts it is demonstrated that present proposals all entail potentially significant drawbacks for monetary policy

a computational approach to the optimal structure of bank input prices abstract most bank deposits contain an embedded option which permits the depositor to withdraw funds at will demand deposits generally allow costless withdrawal while time deposits often require payment of an early withdrawal penalty managing the risk that depositors will exercise their withdrawal option is an important aspect of input pricing this paper acknowledges the threat of deposit withdrawal and then solves for the optimal structure of bank deposit rates

a note on quantity versus price risk and the theory of financial intermediation modeling the behavior of financial intermediaries under conditions of uncertainty has a long and varied history 1 moreover it continues to be a topic of considerable interest because appropriate public policy decisions depend in part on the assumed characteristics of firms participating in the market one central point of debate as presented by sealey 3 involves the potentially contrasting behavioral implications associated with assuming that intermediaries are price setters in their deposit markets as opposed to quantity setters operating under conditions of perfect competition he addresses among other things the important question of whether the supply of financial intermediation is altered by the inclusion of quantity risk sealey argues that in contrast to earlier work by pyle 1 one cannot determine how the degree of association between asset rates and the quantity of deposits influences the amount of lending by intermediaries the purpose of this note is twofold first we provide conditions under which the ambiguity between sealey s and pyle s works may be resolved second we argue that the results from the two models are symmetric we use symmetry here to denote the fact that the conditions on association that for example discourage intermediation are the same in both models when viewed in the context of revenues and costs however the two frameworks require opposite conditions on the association between rates and quantities to achieve identical results concerning the relationship between revenues and costs the approach used involves constructing a scenario that makes the sealey model almost identical to that used earlier by pyle except for the rate versus quantity setting issue we then show that a positive association between asset rates and the quantity of deposits actually discourages lending but promotes the gathering of more deposits we then provide a rationale for why this is consistent with pyle s conjecture that a negative association discourages intermediation in the pure rate uncertainty case interestingly we also argue that while a negative association will promote lending by depository intermediaries under certain conditions the result in this case is generally ambiguous as is the case when a positive association is analyzed in the pyle model the paper is structured as follows in section i we present the basic model derive our results and discuss their implications section ii contains concluding remarks

bank regulation and debt overhang the paper explains why banking regulations are crucial to the unfolding of the current international debt crisis the interplay of deposit insurance and capital adequacy requirements may create strong disincentives against offering relief to debtor countries with solvency problems in spite of the fact that granting relief would improve the worth of the claims held by creditor banks furthermore it is shown that the negotiating stance of individual banks is not related to their exposure to troubled loans in any simple way whether highly exposed banks are tougher than those with limited exposure is also generally dependent on the features of the regulatory environment copyright 1994 by ohio state university press

the costs of wheeling and optimal wheeling rates wheeling is the transmission of electrical energy from a buyer to a seller through a transmission network owned by a third party this paper provides a theoretically sound yet practical to implement basis for setting wheeling rates these wheeling rates are based on marginal costs determined by losses and effects of line flow and voltage magnitude constraints adjusted up or down as necessary to account for embedded capital costs i e revenue reconciliation simple numerical examples are provided to illustrate interesting phenomena such as negative wheeling rates which yield positive net revenue comparisons with present day wheeling rates show that major differences exist the wheeling rates of this paper yield a no lose situation for the buying selling and wheeling utilities

cost of wheeling methodologies the cost of wheeling and the methodology by which it is computed is a high priority problem throughout the power industry due to the growth in transmission facilities the cost differentials between utility companies and the dramatic growth in nonutility generation capacity this paper contains descriptions and summaries of computational procedures and data requirements of four embedded cost methodologies two long run incremental cost methods and the short run marginal cost method four methodologies are also presented for allocating the wheeling costs among a number of wheels when simultaneously present on a company s system as required for the standard long run incremental cost method

japan s fiscal policies in the 1990s this paper first summarises japan s fiscal policies in the 1990s then we investigate the macroeconomic impact of government debt and the sustainability problem we find that the keynesian fiscal policy in the 1990s was not effective and fiscal sustainability may therefore become a serious issue we also estimate the optimal level of deficits and evaluate fiscal reconstruction movements it is shown that the actual deficit exceeded the optimal level in the late 1990s we then inspect fiscal reconstruction movements in the hashimoto administration in 1997 and find that the major factor of recession in 1997 was not fiscal consolidation an important lesson from japan s fiscal policies in the 1990s is that long run structural reform is more important than short run keynesian policy apan s fiscal situation in the 1990s was the worst of any g7 country having deteriorated rapidly with the collapse of the bubble economy in 1991 and the deep and prolonged period of macroeconomic recession which ensued and from which recovery has been slow and modest despite the implementation of counter cyclical keynesian policy in order to evaluate the recent movement of fiscal policies in japan it is useful to consider the following points how did the counter cyclical keynesian policy such as raising public expenditures and reducing taxes matter in the 1990s has fiscal sustainability become a serious issue is it really necessary to reduce fiscal deficits how much was the optimal deficit in the 1990s did the fiscal reconstruction movement in 1997 cause the recession why did it fail this paper will address these issues let us first summarise briefly the recent movement of fiscal deficits and fiscal reform in the 1990s after the bubble economy was broken in 1991 the resulting tax decreases reduced revenue at the same time the politico economic pressures for larger expenditure budgets and counter cyclical packages of fiscal measures intensified responding to them the ministry of finance mof employed several measures for stimulating aggregate demand however as will be shown in section 2 these counter cyclical keynesian measures were not especially effective and resulted in an increase in the fiscal deficit the planned bond dependency rate rose from a low point of 7 6 per cent in fiscal year fy 1991 initial to 18 7 per cent in fy 1994 initial the reality was still worse the implementation of counter cyclical fiscal policy through supplementary budgets in year led to further borrowing still and the actual bonddependency rate was more than 22 per cent in fy 1994

the study of the impacts of potential coalitions on bidding strategies of gencos the paper studies the impacts of potential coalitions on bidding strategies of gencos in a pool based power market the generator under consideration can form any potential coalition with other generators subgroups are then formed and each of these subgroups consists of some members which coordinate their bidding strategies to achieve a common goal noncooperative gaming applies among all the subgroups while cooperative gaming applies among the members in each subgroup by implementation of bids sensitivities the paper presents an algorithm for the members in each coalition subgroup to obtain optimal bids which essentially is based on interior point optimal power flow ipopf model a priority list produced after optimal bids are found for all the potential combinations of coalition is used by the generator under consideration to bargain with members on the list the algorithm and model are tested by the ieee 30 bus system and numerical results are presented

international transport of captured hbox co _2 who can gain and how much if carbon capture and storage ccs is to become a viable option for low carbon power generation its deployment will require the construction of dedicated co2 transport infrastructure in a scenario of large scale deployment of ccs in europe by 2050 the optimal cost minimising co2 transport network would consist of large international bulk pipelines from the main co2 source regions to the co2 sinks in hydrocarbon fields and saline aquifers which are mostly located in the north sea in this paper we use a shapley value approach to analyse the multilateral negotiation process that would be required to develop such jointly optimised co2 infrastructure first we find that countries with excess storage capacity capture 38 45 of the benefits of multilateral coordination implying that the resource rent of a depleted hydrocarbon field when used for co2 storage is roughly 1 per barrel of original recoverable oil reserves or 2 per boe barrel of oil equivalent of original recoverable gas reserves this adds 25 600 to current estimates of co2 storage cost second countries with a strategic transit location capture 19 of the rent in the case of national pipeline monopolies liberalisation of co2 pipeline construction at eu level could eliminate the transit rent and is shown to reduce by two thirds the differences between countries in terms of cost per tonne of co2 exported reaching agreement on such liberalisation may be politically challenging since the payoffs are shown to be strongly divergent across countries

the macroeconomic implications of financial deregulation abstract this paper explores the possible macroeconomic consequences of financial deregulation in an institutional environment where deregulation raises risks in banking the central bank is supposed to maximize an objective function in which the probability of bank failure is an argument it is then shown that the usual tradeoffs between policy objectives imply that financial deregulation will lead to more interest rate smoothing than would otherwise take place and further that because of restricted entry into banking deregulation will call for some inflation the transition toward deregulation raises special problems which are likely to require a more gradual approach toward the stationary equilibrium

an energy brokerage system with emission trading and allocation of cost savings an energy brokerage system can achieve lower emission levels for interconnected electric utilities in a cost effective way the paper presents a linear programming formulation of an energy brokerage system in an operational planning framework emission trading among utilities is envisaged to achieve emission reduction targets the power and emission buy sell quotes for individual utilities are computed and communicated to a central broker the broker determines the power and emission interchange schedule which maximizes the power system savings for all participating utilities the shapley value criterion is proposed for allocation of cost savings among the utilities this criterion reflects the true marginal contribution of a utility to the aggregate system savings and hence is superior to the existing methods of cost savings allocation

financial intermediary s choice of borrowing this research investigates several dynamic stochastic models of a bank s management problem of the term structures of its assets and liabilities a bank can either eliminate most of its interest risk with appropriate options or it can utilize its expertise in its core business and seek extraordinary profits this research concerns a bank with the latter goal in this model the bank seeks to maximize the expected present value of dividend issued subject to the federal reserve s regulatory constraint and liquidity constraint with this model we find that if the available deposits are not too high and the level of liquid assets is high enough then it is optimal for a bank to accept all of the available deposits however if the level of liquid assets is too low then a bank should not issue a dividend or to accept any deposits the properties are still valid even if the bank is not risk neutral

congestion influence on bidding strategies in an electricity market much of the research on bidding strategies in an electricity market has focused on idealized situations where participants have limited market power and the transmission system is not constrained yet congestion may act to effectively give a bidder market power and consequently the ability to influence the market clearing price in such a noncompetitive situation the bidding strategies of market participants will change in this paper the electrical power market is modeled as an oligopoly market and the cournot quantity model is applied to the bidding strategy problem the bidding process with congestion management is modeled as a three level optimization problem a statistical methodology is then proposed as a solution for large systems

strategic gaming in electric power markets abstract this paper presents an overview of strategic gaming used for understanding the effective company and regulatory strategies for various market participants under alternative scenarios on pricing and institutional structures for electric power utilizing the england and wales e w power pool as a testbed we develop an aggregate model of payoffs for various stakeholders under specified demand and supply scenarios with strategic moves by these stakeholders as the key input to be evaluated the use of this type of model in a strategic gaming setting is then examined together with a discussion of experience in using this approach in evaluating a particular decision problem regarding network investment strategies in the e w power market

transmission analysis by nash game method this paper describes an open access transmission method for maximizing profits in a power system the proposed method is based on the nash bargaining game for power flow analysis in which each transaction and its optimal price are determined to optimize the interests of individual parties transmission losses are considered by the proposed method and test cases and results are discussed to present the merits of the proposed method

deposit rates credit rates and bank capital the klein monti model revisited abstract the paper expands the klein monti model with bankruptcy risk and deposit insurance the well known result of independence between deposit and credit rates is shown to be lost the causal relationship becomes recursive and the direction of the recursivity depends on the existence or the absence of a deposit insurance mechanism

loan pushing and triadic relations this paper is an attempt to define and explore the phenomenon of loan pushing in international lending in the 1970s the earliest descriptions of loan pushing are anecdotal this paper surveys the various facets that emerge from these anecdotes and suggests a possible definition that serves as the basis for a theoretical model this model inspired by the confessions of a banker explores a triadic relationship between a corporation in the lender country the lender bank and a borrower in a developing country and suggests that a rational profit maximizing commercial bank could end up pushing loans on to the borrower changes in international commercial banking in the 1970s that facilitated this type of loan pushing are discussed next to the extent that the loan pushing doctrine is valid it implies that the commercial banks were at least as responsible for the massive lending boom of the 1970s as the borrowers and should have been made to bear the cost of adjustment as well the process of sovereign lending in the 1970s appears to consist of voluntary and mutually agreeable contracts between the transnational commercial banks and credit seeking developing countries the suggestion that there could be in this process an element of aggressiveness on the part of the commercial banks that actively and systematically pushed loans on to developing country borrowers may at first sight seem inconceivable if a borrower voluntarily enters into a loan contract he is obviously doing so because the contract is beneficial if such is the case then would it be correct to characterize the process as one of loan pushing also the commercial banks are supposed to be rational profit maximizers thus the amount of lending cannot be more than optimal what then is meant by loan pushing these are a few questions that immediately come to mind it has been argued that international credit can contribute to increasing donor exports see for instance winkler 1929 hyson and strout 1968 gwynne 1983 taylor 1985 darity and horn 1988 basu 1991 basu and deshpande 1995 this is indeed one of the arguments used to explain the phenomenon of loan pushing however not the only one the aim of this paper is to explore the idea of loan pushing a little more deeply by first trying to understand the concept along with a brief review of the literature in the area section 2 the confessions of a young banker gwynne 1983 provide the basis of the theoretical model section 3 which considers a triadic relationship between a commercial bank in a creditor country a debtor nation and a corporation in the creditor country and the compulsions of loan pushing arising

the concentration conduct relationship in bank deposit markets this study investigates the structure conduct performance relationship in retail deposit markets the study explicitly incorporates conduct as the link between structure and performance in local deposit markets it attempts to determine whether banks typically behave competitively or strategically and whether their conduct is influenced by market concentration the empirical investigation is guided by an equilibrium model of a retail deposit market the model is applied to regression equations for local msa mmda and three and six month cd rates the empirical results indicate that strategic conduct is the norm in mmda and in three and six month cd markets copyright 1991 by mit press

optimal bank interest margin under capital regulation and deposit insurance this paper examines the relationships among capital regulation deposit insurance and the optimal bank interest margin in a model where loan losses are the source of uncertainty changes in capital regulation or deposit insurance premiums have direct effects on the bank s interest margin an increase in bank capital requirement or in deposit insurance premiums results in a reduced interest margin under nonincreasing risk aversion comparative static analysis also explores the relation between asset quality and interest margin it is shown that a mean preserving spread of the distribution of loan losses results in a reduced margin

capital regulation and insured banks choice of individual loan default risks abstract how bankers choose the riskiness of their individual assets is an important question it is well known that fixed premium deposit insurance leads a bank to prefer a high variance asset portfolio but its effect on individual asset choice has not been carefully evaluated this paper demonstrates how bank examination procedures and capital adequacy standards can make the value of a bank s deposit insurance contract concave in individual asset risks insured bankers may therefore have a rational preference ceteris paribus for relatively safe individual loans even while they prefer risky portfolio returns the model s implications for loan securitization and the federal regulators new risk based capital standards are discussed

application of actor critic learning algorithm for optimal bidding problem of a genco the optimal bidding for generation companies genco in the deregulated power market is an involved task the problem is formulated in the framework of the markov decision process mdp a discrete stochastic optimization method when the time span considered is 24 hours the temporal difference method becomes attractive for application the cumulative profit over the span is the objective function to be optimized the temporal difference technique and actor critic learning algorithm is employed an optimal strategy is devised to maximize the profit a market clearing system is included in the formulation simulation cases of three seven and ten participants are considered and the results obtained are discussed

the effects of a shift in monetary policy regime on the profitability and risk of commercial banks abstract this paper examines the effects of the fed s october 6th 1979 change in monetary policy regime on the profitability and risk of commercial banks using capital market data and an event study methodology it was found that bank stocks exhibited significant abnormal returns during the announcement week of the policy change when these abnormal returns were decomposed into a part related to unexpected interest rate changes and a part assumed to reflect increased rate variability the results were consistent with a negative relationship between bank returns and interest rate surprises as well as between bank returns and rate variability

foundations of the structure conduct performance paradigm in banking this paper employs an explicit model of the banking firm to derive formally and thereby assess critically the most commonly tested relationships implied by the structure conduct performance paradigm as it applies to the banking industry these include the relationship between loan rates and market concentration deposit rates and market concentration and bank profitability and market concentration the necessary assumptions and simplifications implicit in past empirical studies are outlined and suggestions for future empirical implementation of the underlying model are presented copyright 1991 by ohio state university press