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The value of the liability insurance for Credit Suisse and UBS

Author

Listed:
  • Mario HAEFELI

    (University of Zurich and Swiss Finance Institute)

  • Matthias P. JUTTNER

    (University of Zurich and Swiss Finance Institute)

Abstract

Using an options-based approach, we compute the value of the state guarantee for the liability side of Credit Suisse and UBS. The insurance premiums for these two system-relevant banks are calculated in a dynamic setup from 2004 until 2009 in quarterly steps for time horizons of one and five years. The model captures the characteristics of the current financial crisis and detects the bailout of UBS. Strengthened capital requirements and increased number of audits reduce the value of the guarantee substantially. The model implied CDS spreads are compared to the ones perceived by the market.

Suggested Citation

  • Mario HAEFELI & Matthias P. JUTTNER, 2010. "The value of the liability insurance for Credit Suisse and UBS," Swiss Finance Institute Research Paper Series 10-33, Swiss Finance Institute, revised Jul 2010.
    • Handle: RePEc:chf:rpseri:rp1033
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    File URL: http://ssrn.com/abstract=1638940
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    More about this item

    Keywords

    Banking; Regulation; Option pricing;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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