The Pricing of Bank Debt Guarantees

We analyze the optimal pricing of government-sponsored bank debt guarantees within the context of an asset substitution framework. We show that the desirability of fair pricing of guarantees depends on the degree of transparency of the banking sector: in relatively opaque banking systems, fair pricing exacerbates banks' incentive to take excessive risks, whereas the opposite is true in relatively transparent banking systems.

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Year of publication:	2009-06-30
Authors:	Arping, Stefan
Institutions:	Tinbergen Institute
Subject:	Debt Guarantees \| Fair Pricing \| Financial Stability

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Extent:	application/pdf
Series:	Tinbergen Institute Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Tinbergen Institute Discussion Papers Number 09-057/2
Classification:	G21 - Banks; Other Depository Institutions; Mortgages ; G38 - Government Policy and Regulation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004964453