Abstract
Interest rate is one of the important indicators for banks and other financial institutions to balance the risks and gains.In this paper,based on the decision-making behavior of the borrower,a model for interest rate decision based on the conditional value-at-risk(CVaR) is established,and the optimal interest rate is obtained.Numerical analysis shows that the level of risk aversion directly effects interest rate decision;CVaR could help banks to balance profit and risk;borrowers' profit rate and internal capital are the key factors for bank evading risk.
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