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Journal of Financial Services Research

, Volume 24, Issue 2–3, pp 93–119 | Cite as

Market Pricing of Deposit Insurance

  • Darrell Duffie
  • Robert Jarrow
  • Amiyatosh Purnanandam
  • Wei Yang
Article

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.

Deposit insurance pricing risk-neutral default probability bank failure. 

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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Darrell Duffie
    • 1
  • Robert Jarrow
    • 2
  • Amiyatosh Purnanandam
    • 2
  • Wei Yang
    • 1
  1. 1.Stanford UniversityUSA
  2. 2.Cornell UniversityUSA

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