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Using a model for pricing deposit guarantees that treats the bank's investments as a portfolio of default-free bonds and risky loans, the authors push back uncertainty to the level of the borrowing firm and thus are able to explore how factors like firm leverage, loan maturity, and correlation...
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An analysis of the collapse of the Rhode Island Share and Deposit Indemnity Corp., focusing on distinguishing the elements of failure that it shared with other large state-chartered deposit insurance funds (principally the Ohio and Maryland funds) from those that were unique to Rhode Island.
Persistent link: https://www.econbiz.de/10005428194
An investigation of the effects of interest rate and credit risk on optimal capital structure and investment decisions …. The authors show that with no uncertainty in interest rates, capital regulation will reduce the risk of the bank's assets …, but that under interest rate uncertainty, the impact of regulation may be detrimental and raise the risk of the deposits …
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An argument that information about the value of the deposit-insurance guarantee is available from market-generated data.
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Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders...
Persistent link: https://www.econbiz.de/10005428286
The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes.
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variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related interest rates, the …
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