We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Optimal bank portfolio choice under fixed-rate deposit insurance.
- Authors
Anlong Li
- Abstract
This paper analyzes the investment decisions of insured banks under fixed-rate deposit insurance. The model takes into account the charter value and allows banks to dynamically revise their asset portfolios. Trade-offs exist between preserving the charter and exploiting deposit insurance. The optimal bank portfolio problem is solved analytically for a constant charter value. In any audit period, banks maximize their risk exposure before some critical time and act cautiously thereafter. The corresponding deposit insurance is shown to be a put option that matures at this critical time rather than at the audit date.
- Subjects
INVESTMENTS; INVESTMENT analysis; BANK insurance; AUDIT cycles; RISK; RISK management in business; DEPOSIT insurance
- Publication
Annals of Operations Research, 1993, Vol 45, Issue 1-4, p243
- ISSN
0254-5330
- Publication type
Article
- DOI
10.1007/BF02282052