This paper employs a real option approach to evaluate the value of the option to delay write-offs non-performing loans(NPLs) in commercial banks. On the assumption that the callback rate of NPLs follows the standard geometric Bronian and the reinvestment return follows jump-diffusion model, the partial differential equation which the value keep to is obtained using dynamic programming technique. With the condition of value-matching and smooth-pasting, the solution of the equation is obtained. The optimal timing in banks'writing offtheir NPLs is gained with the solution, along with the condition to put off disposal of NPLs.
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