Synthetizing a debt guarantee: Super-replication versus utility approach

Jacques, Sébastien; Lai, Van Son; Soumaré, Issouf

doi:10.1016/j.irfa.2010.12.002

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2014

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“…Arping (2010), for instance, analyzed the desirability of fair pricing of government guarantees for bank liabilities. Jacques et al (2011) compared two strategies for replicating a put option implemented to synthetize a debt guarantee contract. The first strategy, superreplication, while keeping the portfolio value bigger or equal to a target value, minimized the transaction expenses of replicating a debt insurance put option by applying dynamic linear programming.…”

Section: Introductionmentioning

confidence: 99%

Investigating the effects of issuance of bank debt guarantee on profitability of banking industry

Pirayesh¹,

Gharagozloo²

2014

10.5267/j.msl

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This paper presents an empirical investigation to study the relationship between bank debt guarantee and profitability, increase in banks resources and customer retention. The proposed study has been implemented in one of Iranian banks located in city of Zanjan, Iran over the period of 10 years. The study has used Pearson correlation test to examine three hypotheses of the survey. The results indicate that there were positive and meaningful relationship between bank debt guarantee and profitability (r = 0.863, P-value = 0.001), a positive relationship between bank debt guarantee and bank resources (r = 0.708 with P-value = 0.015) and there was a positive and meaningful relationship between bank debt guarantee and customer retention (r = 0.252 with P-value = 0.001).

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Section: Introductionmentioning

confidence: 99%