@article{6cdcab7c5c5a44e3ba14f251ca10f657,
title = "Revisiting the valuation of deposit insurance",
abstract = "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.",
keywords = "contingent capital bonds, deposit insurance, depositor preference",
author = "Chang, {Chuang Chang} and Chung, {San Lin} and Ho, {Ruey Jenn} and Hsiao, {Yu Jen}",
note = "Funding Information: We thank Robert Webb (the editor) and an anonymous referee for their comments and suggestions. We would also like to thank Professor Chien‐Ling Lo, Professor Tobias Dieler and the participants of the 2017 Annual Meeting of the Financial Engineering Association of Taiwan and the 2018 Annual Meeting of the European Financial Management Association for their helpful suggestions. The authors are grateful to the funding support from the Ministry of Science and Technology of Taiwan (NSC 102‐2410‐H‐126‐003). Publisher Copyright: {\textcopyright} 2021 Wiley Periodicals LLC",
year = "2022",
month = jan,
doi = "10.1002/fut.22284",
language = "English",
volume = "42",
pages = "77--103",
journal = "Journal of Futures Markets",
issn = "0270-7314",
publisher = "Wiley-Liss Inc.",
number = "1",
}