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The Use of Market Information in Pricing Deposit Insurance

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  • Thomson, James B

Abstract

This paper argues that information about the value of the deposit-insurance guarantee is available from market- generated data. In the most favorable circumstances, one may construc t an unbiased estimate of the market value of the deposit guarantee. In less favorable circumstances, one can at least construct a lower bound against which estimates of deposit-insurance premia can be comp ared. Without deposit-insurance reforms, the total guarantee associat ed with federal deposit insurance includes the guarantee on insured d eposits, a conditional guarantee on uninsured deposits, and a conditi onal guarantee of the stockholders' residual claim on the future earn ings of the bank. Copyright 1987 by Ohio State University Press.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 19 (1987)
Issue (Month): 4 (November)
Pages: 528-37

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Handle: RePEc:mcb:jmoncb:v:19:y:1987:i:4:p:528-37

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. William P. Osterberg & James B. Thomson, 1990. "Optimal financial structure and bank capital requirements: an empirical investigation," Working Paper 9007, Federal Reserve Bank of Cleveland.
  2. Ying Yan, 1998. "The FDICIA and bank CEOs' pay-performance relationship: an empirical investigation," Working Paper 9805, Federal Reserve Bank of Cleveland.
  3. Hwang, Dar-Yeh & Shie, Fu-Shuen & Wang, Kehluh & Lin, Jung-Chu, 2009. "The pricing of deposit insurance considering bankruptcy costs and closure policies," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1909-1919, October.
  4. Joseph G. Haubrich, 1998. "Bank diversification: laws and fallacies of large numbers," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-9.
  5. William P. Osterberg, 1990. "Bank capital requirements and leverage: a review of the literature," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-12.
  6. Joseph G. Haubrich & James B. Thomson, 1998. "Large shareholders and market discipline in a regulated industry: a clinical study of Mellon Bank," Working Paper 9803, Federal Reserve Bank of Cleveland.
  7. Ramon P. DeGennaro & James B. Thomson, 1994. "Anticipating bailouts: the incentive-conflict model and the collapse of the Ohio Deposit Guarantee Fund," Working Paper 9407, Federal Reserve Bank of Cleveland.
  8. Jeffery W. Gunther & Linda M. Hooks & Kenneth J. Robinson, 1997. "Adverse selection and competing deposit insurance systems in pre-depression Texas," Financial Industry Studies Working Paper 97-4, Federal Reserve Bank of Dallas.
  9. Kane, Edward J & Unal, Haluk, 1990. " Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms," Journal of Finance, American Finance Association, vol. 45(1), pages 113-36, March.
  10. William P. Osterberg & James B. Thomson, 1994. "Depositor preference and the cost of capital for insured depository institutions," Working Paper 9404, Federal Reserve Bank of Cleveland.
  11. Eccher, Elizabeth A. & Ramesh, K. & Thiagarajan, S. Ramu, 1996. "Fair value disclosures by bank holding companies," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 79-117, October.
  12. Kane, Edward J. & Yu, Min-Teh, 1996. "Opportunity cost of capital forbearance during the final years of the FSLIC mess," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(3), pages 271-290.

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