January 14, 2025 (NO COMMENTS)

Stefano Iabichino introduces the application of stochastic optimal control to a bank’s net interest rate income. In his study, he delineates the optimal fund transfer policy, identifies the optimal leverage ratio and introduces the concept of elastic rates. He concludes by bringing a nuanced observation to the fore: prevailing fund transfer practices may unwittingly expose banks to funding arbitrages as they deviate from the optimal trajectory