Abstract
We provide an approach to the market valuation of deposit insurance that is based on reduced-form methods for the pricing of fixed-income securities under default risk. By reference to bank debt prices as well as qualitative-response models of the probability of bank failure, we suggest how a risk-neutral valuation model for deposit insurance can be applied both to the calculation of fair-market deposit insurance premia and to the valuation of long-term claims against the insurer.
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Duffie, D., Jarrow, R., Purnanandam, A. et al. Market Pricing of Deposit Insurance. Journal of Financial Services Research 24, 93–119 (2003). https://doi.org/10.1023/B:FINA.0000003319.53270.73
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DOI: https://doi.org/10.1023/B:FINA.0000003319.53270.73