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Illegal finance and usurers behaviour

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  • Raffaella Barone
  • Roy Cerqueti
  • Anna Quaranta

Abstract

This paper deals with a stochastic dynamic optimization problem in the context of illegal company financing. Our analysis of the usury phenomenon is conducted by searching for the best interest rate which an illegal financier should apply to a company in order to bring about the firm’s bankruptcy whilst still securing the maximum wealth for the firm’s guarantee. In this case, the company itself can be taken over and used by the financier for illegal activities. Because of the highly complex nature of the problem, the analysis will be performed via simulation studies. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Raffaella Barone & Roy Cerqueti & Anna Quaranta, 2012. "Illegal finance and usurers behaviour," European Journal of Law and Economics, Springer, vol. 34(2), pages 265-277, October.
    • Handle: RePEc:kap:ejlwec:v:34:y:2012:i:2:p:265-277
    DOI: 10.1007/s10657-010-9183-x
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    References listed on IDEAS

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    1. Bester, Helmut, 1994. "The Role of Collateral in a Model of Debt Renegotiation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 72-86, February.
    2. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    3. Amedeo Argentiero & Michele Bagella & Francesco Busato, 2008. "Money laundering in a two-sector model: using theory for measurement," European Journal of Law and Economics, Springer, vol. 26(3), pages 341-359, December.
    4. Raffaella Barone & Donato Masciandaro, 2008. "Worldwide anti-money laundering regulation: estimating the costs and benefits," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 10(3), pages 243-264.
    5. Cifarelli, Michele D. & Masciandaro, Donato & Peccati, Lorenzo & Salsa, Sandro & Tagliani, Aldo, 2002. "Success or failure of a firm under different financing policies: A dynamic stochastic model," European Journal of Operational Research, Elsevier, vol. 136(3), pages 471-482, February.
    6. Lucia Dalla Pellegrina, 2008. "Illegal finance, interest rates and bank lending: the missing supply side of usury," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 10(3), pages 265-283.
    7. Friedrich Schneider, 2008. "Money laundering and financial means of organised crime: some preliminary empirical findings," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 10(3), pages 309-330.
    8. Unger Brigitte, 2009. "Money Laundering - A Newly Emerging Topic on the International Agenda," Review of Law & Economics, De Gruyter, vol. 5(2), pages 807-819, December.
    9. Donato Masciandaro, 2001. "In Offense of Usury Laws: Microfoundations of Illegal Credit Contracts," European Journal of Law and Economics, Springer, vol. 12(3), pages 193-215, November.
    10. Raffaella BARONE, 2004. "Riciclaggio finanziario e credito d’usura: un modello di analisi economica," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 112(2), pages 119-135.
    11. Bagella Michele & Busato Francesco & Argentiero Amedeo, 2009. "Money Laundering in a Microfounded Dynamic Model: Simulations for the U.S. and the EU-15 Economies," Review of Law & Economics, De Gruyter, vol. 5(2), pages 879-902, December.
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    Cited by:

    1. Raffaella Barone & Donato Masciandaro, 2017. "Crime, Money Laundering, And Credit Markets: Can Usury Exist At The Zero Lower Bound?," BAFFI CAREFIN Working Papers 1761, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    2. Roy Cerqueti, 2012. "Financing policies via stochastic control: a dynamic programming approach," Journal of Global Optimization, Springer, vol. 53(3), pages 539-561, July.
    3. Maurizio Bovi & Roy Cerqueti, 2016. "Forecasting macroeconomic fundamentals in economic crises," Annals of Operations Research, Springer, vol. 247(2), pages 451-469, December.
    4. Raffaella Barone & Donato Masciandaro, 2019. "Cryptocurrency or usury? Crime and alternative money laundering techniques," European Journal of Law and Economics, Springer, vol. 47(2), pages 233-254, April.

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    More about this item

    Keywords

    Usury; External financing of companies; Bankruptcy; Stochastic dynamics; Optimization problem; C61; G32; K42;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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