In regards to a debate I’m having with friends, what’s the case for including liquidity premium into discounting factor for a bank?
By liquidity premium here, I’m referring to the cost of funding for a bank that is obtained from market/central bank. I.e. the LIBOR component in any lending product.
Isn’t it considered to be a form of cost of capital here and therefore to be imbedded into the discounting rate when valuing a banking/lending operation?
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