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

December 1, 1991

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W. R. M. Perraudin, and Steven M. Fries Banking Policy and the Pricing of Deposit Guarantees: A New Approach, (USA: International Monetary Fund, 1991) accessed November 21, 2024

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.

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

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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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.

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