English, Article, Journal or magazine article edition: Risk Adjusted Deposit Insurance for Japanese Banks Ryuzo Sato; Rama V. Ramachandran; Bohyong Kang

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Bookmark: http://trove.nla.gov.au/version/141429
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Risk Adjusted Deposit Insurance for Japanese Banks
Author
  • Ryuzo Sato
  • Rama V. Ramachandran
  • Bohyong Kang
Physical Description
  • preprint
Notes
  • The purpose of this paper is to evaluate the Japanese deposit insurance scheme by contrasting the flat insurance rate with a market-determined risk-adjusted rate. The model used to calculate the risk-adjusted rate is that of Ronn and Verrna (1986) . It utilizes the notion of Merton(1977) that the deposit insurance can be based on a one-to-one relation between it and the put option; this permits the application of Black and Scholes(1973) oodel for the calculation of the insurance rate. The risk adjusted preniums are calculated for the thirteen city banks and twenty-two regional banks. The inter-bank spread in risk-adjusted rates in Japan is found to be as wide as in the United States. But the insurance system is only one component of the safety network for a county's banking system. The difference in the American and Japanese networks is described and its implications for the evaluation of the insurance system is discussed.
  • RePEc:nbr:nberwo:3314
Language
  • English
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