Purpose: The purpose of this paper is to develop a loan insurance pricing model allowing for the skewness and kurtosis existing in underlying asset returns. Design/methodology/approach: Using the theory of Gram-Charlier option, the authors first derive a closed-form solution of the...

Purpose The purpose of this paper is to alleviate the moral hazard problem created by deposit insurance and therefore develop a deposit insurance pricing model explicitly considering systematic risk. Design/methodology/approach Using the market model, the authors introduce the systematic risk...