The implied reserves of the Bank Insurance Fund

Episcopos, Athanasios

doi:10.1016/s0378-4266(03)00140-7

Cited by 29 publications

(10 citation statements)

References 25 publications

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“…To begin with, a closely related group of papers uses contingent claims in order to price deposit insurance contracts on an actuarially fair basis. In Merton (1977), Ronn and Verma (1986), Marcus and Shaked (1984) and Episcopos (2004) the liability to the Federal Deposit Insurance Corporation (FDIC) is a European put option written on the assets of the bank. However, these models imply that the deposit insurer cannot opt for bank closure until the expiration of the insurance period.…”

Section: Introductionmentioning

confidence: 99%

Bank capital regulation in a barrier option framework

Episcopos

2008

Journal of Banking & Finance

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Section: Introductionmentioning

confidence: 99%

Bank capital regulation in a barrier option framework

Episcopos

2008

Journal of Banking & Finance

Self Cite

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“…Two related option-based approaches, in particular have been employed in the literature to model regulation to banking. A number of writers, e.g., Ronn and Verma (1986), Episcopos (2004), and Vassalou and Xing (2004), have adopted the path-independent option model based on Merton (1974) as their analytical apparatus. The principal advantage of this approach is the explicit treatment of uncertainty which has long played a prominent role in discussions of banking behavior.…”

Section: Related Literaturementioning

confidence: 99%

Credit Risk Hedging, Deposit Insurance Fund Protection, and Default Risk in Retail Banking during a Financial Crisis

Chen

Lin²

2015

RWE

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The barrier options theory of corporate security valuation is applied to the contingent claims of a regulated bank. The regulator/insurer of the bank owns a down-and-in call option on the bank's assets which can be balanced against the expected coverage cost. This paper examines how the bank's credit risk hedging operation affects its spread behavior and performance and how these effects vary at various levels of the regulatory insurance fund protection. We find that an increase in the bank's credit risk hedging has a negative effect on its loan rate, deposit rate, default risk, and liability value. The regulatory deposit insurance fund protection reinforces the reduction in bank default risk, thereby contributing to the stability of the banking system. The insurance fund protection with credit risk hedging confirms the requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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“…Many of the empirical studies generated by the Merton model focus on the issue of the over or underestimation of the deposit insurance 18,19,20,21,22,23 . For many banks, the most important drawback of these models is the lack of information on the market prices, which makes the model difficult to apply in practice.…”

Section: Introductionmentioning

confidence: 99%

Classification of the risk in the new financing framework of the Deposit Guarantee Systems in Europe: K-Means Cluster Analysis and Soft Computing

Gómez¹,

Partal²,

Espinilla³

2017

IJCIS

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The guidelines published by the European Banking Authority in 2015 about the contributions to the Deposit Guarantee Systems, establish two approaches to classify the member entities' risk: the bucket method and the sliding scale method, allowing freedom to every Member State to decide which methodology to use. In this work, using the bucket method with two different clustering techniques, k-means and soft computing, in a sample that represents more than 90% of the deposits covered in the Spanish banking system during the 2008 to 2014 period, the differences in the distribution of the Deposit Guarantee Fund risk and in the entities' contributions is analyzed. The obtained results reveal important differences. Consequently, the technique chosen by each country will determine the contributions regime.

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The implied reserves of the Bank Insurance Fund

Cited by 29 publications

References 25 publications

Bank capital regulation in a barrier option framework

Bank capital regulation in a barrier option framework

Credit Risk Hedging, Deposit Insurance Fund Protection, and Default Risk in Retail Banking during a Financial Crisis

Classification of the risk in the new financing framework of the Deposit Guarantee Systems in Europe: K-Means Cluster Analysis and Soft Computing

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