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Eur J Law Econ (2012) 34:265277 DOI 10.1007/s10657-010-9183-x
Raffaella Barone Roy Cerqueti Anna Grazia Quaranta
Published online: 6 October 2010 Springer Science+Business Media, LLC 2010
Abstract This paper deals with a stochastic dynamic optimization problem in the context of illegal company nancing. Our analysis of the usury phenomenon is conducted by searching for the best interest rate which an illegal nancier should apply to a company in order to bring about the rms bankruptcy whilst still securing the maximum wealth for the rms guarantee. In this case, the company itself can be taken over and used by the nancier for illegal activities. Because of the highly complex nature of the problem, the analysis will be performed via simulation studies.
Keywords Usury External nancing of companies Bankruptcy Stochastic
dynamics Optimization problem
JEL classication C61 G32 K42
1 Introduction
Several European countries base their anti-usury laws on the denition of a critical interest rate applied to the borrower by the lender, regardless of the nature of the lender.
R. Barone
Department of Economics, Mathematics and Statistics, University of Lecce, Lecce, Italy e-mail: [email protected]
R. Cerqueti (&)
Department of Economical and Financial Institutions, University of Macerata, Macerata, Italy e-mail: [email protected]
A. G. Quaranta
Department of Mathematic for Economics and Social Science, University of Bologna, Bologna, Italye-mail: [email protected]
Illegal nance and usurers behaviour
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266 Eur J Law Econ (2012) 34:265277
The aim of this paper is to shed light on the limits of this approach, emphasizing the importance of the role played by organized crime in usury credit. The problem is more relevant in this period of nancial crisis, since many rms in difculty nd themselves rationed by the legitimate sector and may resort to looking for nance from the usury market.
It is well known that the subject who loans money at a usurious interest rate generally comes from organized crime and uses the usury credit as a money laundering technique.
A criminal organization which has committed a crime gains an aggregate illegal monetary return from this activity. If the criminal organization uses these illegal funds directly, it increases the probability of its being detected and charged with the crime, therefore it seeks to launder dirty money. All illegal activities which circumvent government laws and regulations and...