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Permanent link (DOI): https://doi.org/10.7939/R39W0956G

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Optimal Regulation of Systemic Risk by Tax Open Access

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Other title
Subject/Keyword
finance
systemic
Type of item
Thesis
Degree grantor
University of Alberta
Author or creator
Wai, Kevin
Supervisor and department
Cadenillas, Abel (Mathematical and Statistical Sciences)
Examining committee member and department
Cadenillas, Abel (Mathematical and Statistical Sciences)
Putkaradze, Vakhtang (Mathematical and Statistical Sciences)
Frei, Christoph (Mathematical and Statistical Sciences)
Aguerrevere, Felipe (Finance and Statistical Analysis)
Department
Department of Mathematical and Statistical Sciences
Specialization
Mathematical Finance
Date accepted
2014-09-24T10:07:51Z
Graduation date
2014-11
Degree
Master of Science
Degree level
Master's
Abstract
Financial systemic crisis could be broadly understood as the deterioration of the banking sector which results in damage to the real economy. From elementary accounting, a firm's financial position can be characterized by the value of its asset holdings versus the amount it borrow from others. If assets are not worth sufficiently more than the firm owes, it will be in distress, and will not be able to operate its business efficiently. In the case of a bank, this means the difference between the dollar amount it lends and the amount it receives from depositors is not sufficiently high or even worse, is negative. If either case happens to the aggregate banking sector, a systemic crisis will ensue, and there will be significant costs incurred by society. This M.Sc. thesis will concentrate on an existing economic model which incorporates the risk of systemic crisis, as defined above, at a future time. In the context of this model, a tax as a function of the banks' dollar value of investments, raised debt, and equity funding at present time will incentivize them to choose these quantities in the interest of social welfare. The thesis will provide mathematical explanations for this effect. Moreover, MATLAB codes are included to calculate the tax amounts charged to each bank when they behave in a socially optimal manner.
Language
English
DOI
doi:10.7939/R39W0956G
Rights
Permission is hereby granted to the University of Alberta Libraries to reproduce single copies of this thesis and to lend or sell such copies for private, scholarly or scientific research purposes only. Where the thesis is converted to, or otherwise made available in digital form, the University of Alberta will advise potential users of the thesis of these terms. The author reserves all other publication and other rights in association with the copyright in the thesis and, except as herein before provided, neither the thesis nor any substantial portion thereof may be printed or otherwise reproduced in any material form whatsoever without the author's prior written permission.
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