Government bailout policies can take the form of recapitalisation measures, the purchase of toxic assets and the provision of guarantees. Recapitalisation measures take the form of a purchase of newly issued bank shares at the current market price (). Government purchases of toxic assets consists of purchasing loans () and taking over loan losses at rate and guarantees on loans at rate provide insurance to the banking system. The banking sector makes decisions which maximises the present discounted value of dividends and it applies the stochastic discount factor of equity owners
). Government purchases of toxic assets consists of purchasing loans (
) and taking 
and 
provide insurance to the banking system. The banking sector makes decisions which maximises the present discounted value of dividends and it applies the stochastic discount 