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The Gramm--Leach--Bliley Act: optimal interest margin effects of commercial bank expansion into insurance underwriting

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  • Jyh-Horng Lin
  • Jeng-Yan Tsai
  • Paichou Huang

Abstract

We examine the optimal bank interest margin effects of the Gramm--Leach--Bliley Act (GLBA), particularly allowing commercial banks to engage in insurance underwriting. This article models bank equity explicitly integrating the Down-and-Out Call (DOC) option of insurance underwriting with the standard call option of commercial banking activities. We conclude that commercial banks may not appear to benefit from broader product mix when the expansion of insurance underwriting is relatively large scale or insurance asset quality is relatively low.

Suggested Citation

  • Jyh-Horng Lin & Jeng-Yan Tsai & Paichou Huang, 2012. "The Gramm--Leach--Bliley Act: optimal interest margin effects of commercial bank expansion into insurance underwriting," Applied Economics Letters, Taylor & Francis Journals, vol. 19(15), pages 1459-1463, October.
  • Handle: RePEc:taf:apeclt:v:19:y:2012:i:15:p:1459-1463
    DOI: 10.1080/13504851.2011.633884
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