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Mathematics and Financial Economics
Erschienen in: Mathematics and Financial Economics 1/2020

10.01.2020

Game theoretic valuation of deposit insurance under jump risk: from too small to survive to too big to fail

verfasst von: Tat Wing Wong

Erschienen in: Mathematics and Financial Economics | Ausgabe 1/2020

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Abstract

This study examines the valuation problem in deposit insurance as a game option between the deposit insurer and the insured bank with asymmetric bankruptcy costs. The asset-to-deposit ratio of the insured bank is modeled as an exponential Lévy process with a spectrally negative jump. The study examines a wide range of scenarios in which the optimal closure policies of both parties are fully characterized. Explicit solutions are derived under the exponential jump diffusion case. This model captures several important issues in banking supervision, including the too big to fail and too small to survive phenomena, bank reorganization, and regulatory forbearance.
Vorheriger Artikel Fractional risk process in insurance
Nächster Artikel Optimal portfolio choice: a minimum expected loss approach

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Fußnoten
1
Unless the asset-to-deposit begins at the self-closure region, which implies that the bank will go bankrupt immediately.
 
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Metadaten
Titel
Game theoretic valuation of deposit insurance under jump risk: from too small to survive to too big to fail
verfasst von
Tat Wing Wong
Publikationsdatum
10.01.2020
Verlag
Springer Berlin Heidelberg
Erschienen in
Mathematics and Financial Economics / Ausgabe 1/2020
Print ISSN: 1862-9679
Elektronische ISSN: 1862-9660
DOI
https://doi.org/10.1007/s11579-019-00245-x

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