A number of studies have argued that the thrift industry is not viable as it is presently structured and regulated because mortgage yields are inadequate to cover interest and operating costs. This hypothesis suggests that observed profitability is primarily the result of the tendency of the...

To shed light on various proposals found in most modern agendum for deposit insurance (DI) reform, using contingent claims analysis, we derive closed forms formulas to value coinsurance contarcts and a private-public partnership. We then comapre the merits of these DI arrangements between...

We extend the financial guarantee insurance literature by modeling, under stochastic interest rates, private financial guarantees when the guarantor potentially defaults. By performing numerical simulations under plausible parameters values, we characterize the differential impact of the...

Merton and Bodie (1992) show that third-party financial guarantees are overwhelming pervasive. Using the risk-neutral valuation framework of Brennan (1979) and Stapleton and Subrahmanyam (1984), without imposing any no loss-no gain condition on stockholders and debtholders, we examine the impact...

Loans guaranteed by private parties other than government agencies experienced an explosive growth in the early 1980s. Although private financial guarantees are widely used, models for valuing them are not well developed. Using option-pricing theory, in a discrete-time framework we obtain...

French Abstract: Les obligations à hauts rendements ou (high-yield bonds (HYB)) ont la particularité d'être fortement corrélées avec l'équité contrairement aux obligations de haute qualité qui sont quant à elles fortement corrélées avec les obligations gouvernementales. Intuitivement,...

The passage of the Federal Deposit Insurance Corpo­ration Improvement Act of 1991 (FDICIA), which removed some of the freedom or latitude the FDIC had in resolving and closing insolvent institutions, makes it clear that regulatory closure rules are not invariant with regard to time and events....

In this paper, we develop a methodology to model the risk of losses resulting from a natural disaster in which the intensity parameter of the non-homogeneous Poisson process has an upward trend and a seasonal component. We apply this model to losses due to floods in the Financial Assistance...

It has been long recognized that insured banks can exploit a mispriced risk-independent flat-rate deposit insurance (DI) system by increasing leverage (i.e., decreasing capital ratios) and/or asset risk. Such a behavior is known as moral hazard. There are, however, factors that can induce...

Although option pricing schemes in regime-switching frameworks were extensively explored in the literature, many models developed disregard the unobservability of regimes. In such a context, the traditional pricing approach pioneered by Hardy (2001) applied to vanilla options exhibits...