Revisiting the valuation of deposit insurance

Chuang Chang Chang, San Lin Chung, Ruey Jenn Ho, Yu Jen Hsiao

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


This study proposes a framework for pricing deposit insurance that evaluates the effect of depositor preference laws and the issuance of contingent capital bonds. Four main findings emerge from this study. First, traditional option pricing models of deposit insurance overestimate insurance premiums. Second, only large issuances of contingent capital bonds decrease deposit insurance premiums under depositor preference. Third, the issuance of contingent capital bonds can partially offset banks' excessive risk-taking caused by regulatory forbearance. Finally, although large banks have implied too-big-to-fail risks, the deposit insurer's costs from large banks are not nearly as high as reported in previous studies.

Original languageEnglish
Pages (from-to)77-103
Number of pages27
JournalJournal of Futures Markets
Issue number1
Publication statusPublished - Jan 2022


  • contingent capital bonds
  • deposit insurance
  • depositor preference

ASJC Scopus subject areas

  • Accounting
  • General Business,Management and Accounting
  • Finance
  • Economics and Econometrics


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