Research On Pricing Of Chinese Deposit Insurance

Being a significant supporting system of private financial institution, DepositInsurance System has played a crucial role on protecting interest rate liberalizationand avoiding financial crisis. The keys of deposit insurance system are how to pricingthe deposit insurance, establish a fairly deposit insurance premium rate and assess therisk of banks accurately. The pricing arrangement is classified into two kindsaccording to the existing researches: one is the option pricing model on the basis ofthe market date, the other is the loss expectancy pricing model, which estimates risksby using the accounting date of banks.On consideration of Chinese condition, this article adopted the option pricingmodel and calculated the regulatory forbearance coefficients under the existingimplicit deposit insurance system. Developing through Merton model, theRonn-Verma model was used in pricing the deposit insurance of listed banks, whichhad a practical significance for the upcoming deposit insurance system. This articlecould be divided into five parts. The first part was a general introduction of currentmethods of deposit insurance pricing and illustration of the major researchachievements both in China and other countries. The second part was a theoreticalanalysis on deposit insurance pricing, which included its connotation, risks andinfluence factors. The third part was an analysis on the main pricing models andRonn-Verma model, which used in this article. Then, we came to the most importantpart of the article,an empirical analysis was put on the deposit insurance rate byRonn-Verma model. Specifically speaking, the article established a conditionalheteroscedasticity module for the volatility of stock price return rates, calculated thevolatility of the stock price return rates and finally got the outcome by putting the dataof listed banks into Ronn-Verma model. The last part was some related advice to thepricing of Chinese deposit insurance.