Banking Policy and the Pricing of Deposit Guarantees: A New Approach
December 1, 1991
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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.
Subject: Auditing, Banking, Deposit insurance, Financial crises, Financial markets, Government liabilities, Labor, Public financial management (PFM), Stock markets, Wages
Keywords: audit bank, Auditing, bank closure, bank earnings, bank regulator, bank shareholder, Deposit insurance, earnings stream, Government liabilities, stochastic process, stock market value, Stock markets, Wages, WP
Pages:
22
Volume:
1991
DOI:
Issue:
131
Series:
Working Paper No. 1991/131
Stock No:
WPIEA1311991
ISBN:
9781451933192
ISSN:
1018-5941
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.
