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Banking Policy and the Pricing of Deposit Guarantees: A New Approach
Author:
Mr. W. R. M. Perraudinnull

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and
Mr. Steven M. Friesnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 1991: Issue 131
Language:
English
Publication Date:
01 Dec 1991
DOI:
https://doi.org/10.5089/9781451933192.001
ISBN:
9781451933192
ISSN:
1018-5941
Pages:
22
Keywords:
WP; stochastic process; stock market value; bank shareholder; audit bank; bank regulator; earnings stream; bank earnings; bank closure; Wages; Stock markets; Deposit insurance; Government liabilities; Auditing
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 1991: Issue 131