Kh. Enkhbayar, G. Battulga, S. Batbileg, “Multi-period loan interest rate Nash model with Basel II solvency constraint”, Bulletin of Irkutsk State University. Series Mathematics, 2022, Volume 41,Pages <nobr>3

Dynamic systems and optimal control

Multi-period loan interest rate Nash model with Basel II solvency constraint

Kh. Enkhbayar^a, G. Battulga^b, S. Batbileg^b

^a Mongolian University of Science and Technology, Ulaanbaatar, Mongolia
^b National University of Mongolia, Ulaanbaatar, Mongolia

Abstract: This paper introduces multi–period loan interest rate Nash game models in the banking sector under regulatory solvency constraints. By taking solvency constraint as Basel II and modelling economic condition as AR(1) process, we obtain results regarding the existence of loan interest rate equilibrium. A sensitivity analysis for the solvency constraint model and some numerical results are presented.

Keywords: Nash equilibrium model, one factor KMV/Riskmetrics model, Basel II solvency constraint, credit rating, loan interest rate.

UDC: 519.8

MSC: 91A06, 91A10, 91G40

Received: 30.03.2022
Revised: 05.05.2022
Accepted: 12.05.2022

Language: English

DOI: 10.26516/1997-7670.2022.41.3