Capital standard,forbearance and deposit insurance pricing under GARCH

We propose a multiperiod deposit insurance pricing model that simultaneously incorporates the capital standard and the possibility of forbearance. The model employs the recently developed GARCH option pricing technique in determining the deposit insurance value. Our model offers two distinctive advantages. First, it explicitly considers the implications of the strict enforcement on capital standard as stipulated in FDIC Improvement Act of 1991. Second, the use of the GARCH model allows us to capture many robust features exhibited by financial asset returns. By the GARCH option pricing theory, the value of a contingent claim is a function of the asset risk premium. This unique feature is found to be prominent in determining the bank's deposit insurance value. We also examine the effects of capital forbearance and moral hazard behavior in this multiperiod deposit insurance setting.     

The pricing of deposit insurance in the presence of systematic risk

Based on the Merton (1977) put option framework, we develop a deposit insurance pricing model that incorporates asset correlations, a measurement for the systematic risk of a bank, to account for the risk of joint bank failures. Estimates from our model suggest that actuarially fair risk-based deposit insurance that considers only individual bank failure risk is underpriced, leaving insurance providers exposed to net losses. Our estimates also capture the size premium where big banks are priced with higher deposit insurance than small banks. This result is particularly relevant to the current regulatory concerns on big banks that are too-big-to-fail. Above all, our approach provides a unifying framework for integrating risk-based deposit insurance with risk-based Basel capital requirements.     

The pricing of deposit insurance considering bankruptcy costs and closure policies

The paper aims to study the pricing issue of deposit insurance with explicit consideration of bankruptcy costs and closure policies. Full coverage from deposit insurance is imposed by many regulators to stabilize the banking system in the current financial crisis, despite of the potential moral hazard problems. We argue that bankruptcy cost is an important factor in pricing deposit insurance, especially when the insured institution is insolvent. Applying the isomorphic relationship between deposit insurance and put option, we first derive a closed-form solution for the pricing model with bankruptcy costs and closure policies. Then, we modify the barrier option approach to price the deposit insurance in which the bankruptcy cost is set as a function of asset return volatility and more realistic closure policies considering possible forbearance can be accounted for. The properties of the models are supported by numerical simulations and are consistent with the risk-based pricing scheme.     

人寿保险精算监管系统

一、系统目标近年来,我国寿险业的迅速发展,外资寿险公司的不断进入,对寿险监管提出了更高的标准和要求。寿险经营的长期性和经营的复杂性也要求监管者要有强有力的技术手段对保险公司的经营进行监督管理。保险精算技术是寿险公司运营的重要基础,也是寿险监管的重要技术手段。而目前国际上通行的以保险公司偿付能力为核心的监管方式更离不开精算技术。我国目前寿险监管已建立了对保险公司偿付能力监管的制度,颁布和实施了一系列法规、制度。而在监管技术手段上却远远落后于监管制度建设,使得寿险监管手段和监管效率落后于寿险业的快速发展。…     

Charter value,minimum bank capital requirement and deposit insurance pricing in equilibrium

This paper shows that leaving insolvent banks with large enough charter values open can be optimal and derives normative bank closure/reorganization policies based on the liquidation value of assets and the charter value. The charter value of a bank is broadly defined as the value that would be foregone due to a closure. Our simulations of risk taking show that an optimal forbearance for an insolvent bank with a large enough charter value alleviates the moral hazard problem. This is because increasing the risk raises the probability of losing the charter value, although it generates a moral hazard gain.     

基于Java平台的寿险精算网络系统

寿险业务的日常运作是以精算方法为基础的，它已贯穿于寿险业务的方方面面。目前，寿险精算已形成较完善和系统的理论和方法，但在国内，寿险精算仍是一项难以理解且很复杂的业务，它涉及定价、营销、控制等各个环节，且随着现代保险产品在功能和结构上的更新而变得日益多样。精算所需处理的问题也越来越复杂，     

Actuarial concepts in the theory of financing life insurance activities

Abstract

In this paper is presented an attempt by the author to obtain conceptual clarity in the actuarial considerations concerned with financing life insurance schemes, whether private or public, It will, of course, be realized that the author is concerned ultimately with the financing of public or semi-public schemes. However, it is with deliberate intention that the exposition is presented in general terms. As is often the case, abstraction means clarification, thus avoiding a shifting of the meaning of the concepts as one goes from one special situation to another.     

Market discipline and deposit insurance

Cross-country evidence presented in this paper suggests that explicit deposit insurance reduces required deposit interest rates, while at the same time it lowers market discipline on bank risk taking. Internationally, deposit insurance schemes vary widely in their coverage, funding, and management. This reflects that there are widely differing views on how deposit insurance should optimally be structured. To inform this debate, we use a newly constructed data set of deposit insurance design features to examine how different design features affect deposit interest rates and market discipline.     

An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory

It is not uncommon in the arrangement of a loan to include as part of the financial package a guarantee of the loan by a third party. Examples are guarantees by a parent company of loans made to its subsidiaries or government guarantees of loans made to private corporations. Also included would be guarantees of bank deposits by the Federal Deposit Insurance Corporation. As with other forms of insurance, the issuing of a guarantee imposes a liability or cost on the guarantor. In this paper, a formula is derived to evaluate this cost. The method used is to demonstrate an isomorphic correspondence between loan guarantees and common stock put options, and then to use the well developed theory of option pricing to derive the formula.     

Capital regulation and deposit insurance

A model of deposit insurance in which the bank closure rule can systematically deviate from the economic insolvency condition used in earlier models is developed. Simulation of that model for plausible parameter values suggests that the failure to close banks on a timely basis has a profound effect in increasing the insurer's liability. The implications of these results for capital regulation are discussed.     

Thrift deregulation and federal deposit insurance

The federal insurance funds were designed to cover all insured deposits but lacked a rule specifying how these deposits would be covered if a crisis occurred that swamped either insurance fund. The Congress apparently accepted the argument that strict enforcement and regulation could be used to reduce the probability of failure and thereby avoid large losses to the insurance fund. This flaw in the federal deposit insurance system has permitted insolvent institutions to remain open. The very poor performance of these institutions has skewed aggregate thrift performance in recent years, masking the performance of solvent institutions. A protracted debate has ensued centering on the cost of resolving troubled thrifts and whether healthy thrifts can pay these costs. This debate has drawn attention away from the potential value of the thrift charter.This article was originally presented at the conference, Perspectives on Banking Regulation, Federal Reserve Bank of Cleveland, November 3–4, 1988.     

The market pricing of disability income insurance for individuals

Individuals' needs for disability income insurance dominate those for life insurance, yet relatively few buyers and sellers enter into disability contracts compared to life contracts. This phenomenon appears contradictory to the existence of a workably competitive market. This study examines the relation of disability income insurance prices to underlying contractual and insurer characteristics. Our results are supportive of a competitive market scenario. We observe a strong relation between prices and elimination periods, which is consistent with the presence of adverse selection. Our results have implications for how individuals should choose some policy and insurer characteristics, but they also suggest that buyers may need to be better informed about other pricing factors.     

Variable-rate deposit insurance: A re-examination

This paper investigates the impact of variable-rate deposit insurance on the financial and real sectors of the economy and its role as an absorber of bankruptcy risk within these sectors. A variable-rate system raises the cost of funds to the real sector and increases probability of bankruptcy of the borrowing firms. When such bankruptcies occur, society experiences a dead weight loss. We argue that appropriate deposit insurance pricing must weigh the social costs connected with both financial firm failure and real-sector bankruptcy.     

A hierarchical agency model of deposit insurance

This paper develops a hierarchical agency model of deposit insurance. The main purpose of the analysis is to propose a micro-founded model of deposit insurance schemes and study their effects on the behavior of depositors and the monitoring problem for a bank. This paper also characterizes a risk-based premium in equilibrium, and conducts a comparative statics analysis of depositors’ optimal actions. The results supply the basic theoretical foundation for designing deposit insurance schemes. Our findings are consistent with the empirical research on depositor behavior.     

Principle of equivalent utility and universal variable life insurance pricing

In this paper we study the pricing problem for a class of universal variable life (UVL) insurance products, using the idea of principle of equivalent utility. As the main features of UVL products we allow the (death) benefit to depend on certain indices or assets that are not necessarily tradable (e.g., pension plans), and we also consider the “multiple decrement” cases in which various status of the insured are allowed and the benefit varies in accordance with the status. Following the general theory of indifference pricing, we formulate the pricing problem as stochastic control problems, and derive the corresponding HJB equations for the value functions. In the case of exponential utilities, we show that the prices can be expressed explicitly in terms of the global, bounded solutions of a class of semilinear parabolic PDEs with exponential growth. In the case of general insurance models where multiple decrements and random time benefit payments are all allowed, we show that the price should be determined by the solutions to a system of HJB equations, each component corresponds to the value function of an optimization problem with the particular status of the insurer.     

Implicit deposit insurance and deposit guarantees: Characteristics of Australian bank risk premia

This paper examines the hypothesis that CD issue yields of Australian banks incorporate a premium that reflects bank risk. Our empirical analysis of Australian banks' CD premiums suggests the data is consistent with this hypothesis and hence supports the view that CD holders do not perceive their deposits as being risk-free. Nor do we find any statistically significant difference between the premiums paid by private banks with implicit deposit insurance vis-a-vis those paid by government-owned banks with explicit government guarantees.     

个人信用信息生保险产品定价中的应用

在欧美国家，个人信用体系已经非常健全，个人信用记录和评分的应用已经深入到了社会中的各个层面。在国际大型财产险企业中，有90％的公司在定价和承保决策中不同程度地使用了客户的信用信息。[第一段]     

个人信用信息在保险产品定价中的应用

在欧美国家,个人信用体系已经非常健全,个人信用记录和评分的应用已经深入到了社会中的各个层面。在国际大型财产险企业中,有90%的公司在定价和承保决策中不同程度地使用了客户的信用信息。保险公司的有关研究发现,个人信用的好坏与个人的风险是正相关的。信用评级较低的司机的理赔率比评级高的要高40%。通过在车险定价模型中考虑个人信用     

美国存款保险制度对我国的启示

我国围绕建立存款保险制度酝酿已久，最近国务院已原则同意建立存款保险制度，由中国人民银行会同财政部、中国银监会、国务院法制办、国家发改委成立工作组。这意味着建立我国存款保险机制已正式启动。