Repudiation Risk and Restitution Costs: Toward Understanding Premiums on Insured Deposits
This paper contains a theoretical development of the relationship of CD premiums to both the risks of the CD issuer and the third party government guarantor of those deposits. The theoretical development shows that the risk of the guarantor derives from the possibility that the guarantee could be repudiated and/or the restitution of the depositor's claim could be costly. The empirical analysis of the premiums for insured CDs indicates that during the years preceding the ultimate collapse of the FSLIC, the market priced the risk of both the guarantor as well as the firm. The guarantor risk pricing was responsive to the insolvency of the guarantor, the attempts to recapitalize the guarantor and the efforts to resolve the insolvent thrifts. During this eventful time period CD premiums rose to 187 basis points and averaged 79 and 54 basis points. Copyright 1994 by Ohio State University Press.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 26 (1994)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879|
When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:26:y:1994:i:3:p:439-59. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.