The pricing of deposit insurance in the presence of systematic risk Lee,S-C, Lin,C-T and Tsai,M-S 2015, The pricing of deposit insurance in the presence of systematic risk, Journal of banking and finance, vol. 51, pp. 1-11, doi: 10.1016/j.jbankfin.2014.10.012. Attached Files Name Description MIMEType Size Downloads Title The pricing of deposit insurance in the presence of systematic risk Author(s) Lee,S-C Lin,C-T orcid.org/0000-0001-6367-3606 Tsai,M-S Journal name Journal of banking and finance Volume number 51 Start page 1 End page 11 Publisher Elsevier BV Place of publication Amsterdam, Netherlands Publication date 2015-02 ISSN 0378-4266 Keyword(s) Asset correlation Bank size Deposit insurance G21 G28 Systematic risk Summary Based on the Merton (1977) put option framework, we develop a deposit insurance pricing model that incorporates asset correlations, a measurement for the systematic risk of a bank, to account for the risk of joint bank failures. Estimates from our model suggest that actuarially fair risk-based deposit insurance that considers only individual bank failure risk is underpriced, leaving insurance providers exposed to net losses. Our estimates also capture the size premium where big banks are priced with higher deposit insurance than small banks. This result is particularly relevant to the current regulatory concerns on big banks that are too-big-to-fail. Above all, our approach provides a unifying framework for integrating risk-based deposit insurance with risk-based Basel capital requirements. Language eng DOI 10.1016/j.jbankfin.2014.10.012 Field of Research 150203 Financial Institutions (incl Banking) Socio Economic Objective 900101 Finance Services HERDC Research category C1 Refereed article in a scholarly journal ERA Research output type C Journal article Copyright notice ©2015, Elsevier BV Persistent URL http://hdl.handle.net/10536/DRO/DU:30068881 Document type: Journal Article Collections: Faculty of Business and Law School of Accounting, Economics and Finance 2018 ERA Submission Related Links Link Description Connect to published version Go to link with your DU access privileges     Unless expressly stated otherwise, the copyright for items in DRO is owned by the author, with all rights reserved. Versions Version Filter Type Thu, 08 Jan 2015, 15:32:07 EST Thu, 08 Jan 2015, 15:33:09 EST Thu, 08 Jan 2015, 15:47:58 EST Fri, 09 Jan 2015, 04:02:11 EST Fri, 13 Feb 2015, 08:18:49 EST Fri, 13 Feb 2015, 11:48:02 EST Fri, 13 Feb 2015, 11:48:50 EST Sat, 13 Jan 2018, 01:31:01 EST Tue, 23 Jan 2018, 11:05:50 EST Filtered Full Citation counts:   Cited 17 times in TR Web of Science Cited 19 times in Scopus Search Google Scholar Access Statistics: 581 Abstract Views, 3 File Downloads  -  Detailed Statistics Created: Thu, 08 Jan 2015, 15:47:58 EST

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