Does Limited Liability Reduce Leveraged Risk?: The Case of Loan Portfolio Management

  title={Does Limited Liability Reduce Leveraged Risk?: The Case of Loan Portfolio Management},
  author={Debasis Barik and Siddhartha P. Chakrabarty},
  journal={Journal of Risk and Financial Management},
Return–risk models are the two pillars of modern portfolio theory, which are widely used to make decisions in choosing the loan portfolio of a bank. Banks and other financial institutions are subjected to limited-liability protection. However, in most of the model formulation, limited liability is not taken into consideration. Accordingly, to address this, we have, in this article, analyzed the effect of including it in the model formulation. We formulate four models, two of which are… 

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