Banking Policy and the Pricing of Deposit Guarantees : A New Approach

Author/Editor:

W. R. M. Perraudin ; Steven M. Fries

Publication Date:

December 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper describes a new approach to pricing government deposit guarantees that uses techniques of stochastic process switching employed in the recent literature on exchange rate determination. Our model avoids inconsistent assumptions about the information available to investors and the government common in previous work based on an option pricing approach. We derive actuarially fair deposit insurance premia and optimal financial reorganization rules and examine the role of banking policies such as capital requirements.

Series:

Working Paper No. 91/131

Subject:

Notes:

Describes a new approach to pricing government deposit guarantees that uses techniques of stochastic process switching employed in the recent literature on exchange rate determinations.

English

Publication Date:

December 1, 1991

ISBN/ISSN:

9781451933192/1018-5941

Stock No:

WPIEA1311991

Format:

Paper

Pages:

22

Please address any questions about this title to publications@imf.org