Research On The Expansion Of Deposit Insurance Pricing Model Based On The Merton Option Pricing Framework And The Study Of Calculation Examples

With the liberalization of finance and the marketization of interest rates,the inherent instability of commercial banks due to their debt management model has gradually expanded.At the same time,the contagiousness of some banks during bankruptcy has gradually increased,making depositors more prone to losses,which is not conducive to the stability of the banking system.To this end,various countries have successively established deposit insurance systems to increase depositors’ confidence and promote the healthy development of financial systems.China also promulgated the "Deposit Insurance Regulations" in 2015,which clearly stipulates that the deposit insurance premium rates of banks will be determined based on the actual operating conditions and risk levels of banks,but they have not issued specific methods for determining risk differential premium rates.The reasonable pricing of deposit insurance is precisely the key and difficult point of whether the system can be successfully implemented.Therefore,the deposit insurance pricing model based on the actual risks of banks is worth studying.In this context,this article conducts an in-depth study on the option pricing model of deposit insurance,and addresses the shortcomings of the classic model such as too strict assumptions,less integration of actual factors in banks,and insufficient risk measurement.First of all,from the perspective of deposit insurance institutions’ maximum underwriting amount,the parameter of deposit insurance underwriting rate is introduced into the compensation function to improve the previous pricing model that considers the limit of compensation.Second,taking into account the corresponding costs that may be incurred during bank bankruptcy liquidation,the asset liquidation discount rate parameter is included in the pricing process,and a pricing model that takes into account the compensation limit and liquidation cost at the same time can be constructed.Then,combined with the characteristics of bank liability structure,in the insurance payment process,according to the order of bankruptcy repayment,bank debts are divided into three categories and introduced into the model,and a model containing three realistic factors of liability structure,liquidation cost,and compensation limit is constructed.Finally,the bank risk measured by the model is refined and supplemented.By considering the bank’s technical bankruptcy due to insufficient liquidity,the bank’s liquidity risk is introduced into the model;the Sharpe single index model is used to introduce the bank’s internal systemic risk into the model,and a pricing that includes both the bank’s liquidity and systemic risk is constructed.The empirical research and the simulation part of the calculation example take 25 listed commercial banks in China as the research object,and use the Merton model and the extended model to calculate the deposit insurance premium rate.Investigate the individual and joint effects of compensation limits,liquidation costs,and liability structure on the premium rate,and analyze the relationship between bank liquidity risks,systemic risks,and the premium rate.The research results show that: First,after considering the compensation limit of deposit insurance,the premium rate will drop,and the higher the compensation limit,the higher the premium rate.After considering liquidation costs,the premium rate will rise,and the higher liquidation costs,the higher the premium rate.After considering the bank’s liability structure,the premium rate will decline.The specific relationship is that the higher the proportion of priority debt,the higher the deposit insurance rate,and the higher the proportion of subordinated debt,the lower the premium rate,but subordinated debt has a greater impact on deposit insurance premium rates.Second,when the liquidation cost and the compensation limit are considered at the same time,and the effect of the liquidation cost on the premium rate is less than the effect of the compensation limit,the joint effect of the two on the premium rate has a "positive" synergistic effect.That is,when one of the factors increases,the effect of the other factor on the premium rate will be more significant.When three factors including the liability structure are considered at the same time,and the liquidation cost is small and the proportion of subordinated debt is relatively high,the increase in the liquidation cost or the compensation limit will cause the liability structure to have a more significant impact on the premium rate.Third,ignoring the liquidity risk borne by banks may lead to an underestimation of deposit insurance premium rates.Ignoring the systemic risks borne by banks will result in a severe underestimation of deposit insurance premium rates.Moreover,the increase in bank systemic risk will amplify the impact of liquidity risk on deposit insurance premium rates.Fourth,the average deposit insurance premium rate of state-owned commercial banks is much lower than that of joint-stock commercial banks,urban commercial banks,and rural commercial banks.In addition,the deposit insurance premium rates of various banks within the four types of commercial banks are also quite different,which further confirms the necessity and urgency of implementing risk differential premium rates.