Pricing Of Deposit Insurance Based On Knight Uncertainty And Systemic Risk

The deposit insurance system is dedicated to safeguarding the interests of depositors and maintaining the stability of the financial sector.How to obtain a reasonable price for deposit insurance has been an important topic of discussion among scholars at home and abroad.In the past,most scholars usually assumed that the market was an ideal financial market when studying problems.Investors can not only accurately predict various possible states in the future,but also know the probability of various states.However,it is often difficult for investors to obtain such detailed information in the ever-changing financial markets.Risk and Knight uncertainty coexist in the capital market.This means that the market is incomplete.Therefore,the deposit premium calculated after considering the uncertainty factor of Knight in the model can be more consistent with the actual situation.In addition,the outbreak of systemic financial risks will cause a devastating blow to the economic system and the real economy.Preventing systemic risk is now a very important element,and commercial banks not only face individual risks but also systemic risks.The lack of systemic risk factors in the deposit insurance pricing process will lead to the deviation of the deposit insurance price,which cannot reflect the fair deposit premium.Therefore,the pricing model should also include the relevant factors of systemic risk.Based on the above background,this article incorporates Knight uncertainty and systemic risk into the classic deposit insurance pricing model and constructs a deposit insurance pricing model based on Knight uncertainty and systemic risk.This article also studies the variation of deposit premium with relevant parameters through comparative static analysis.In addition,this article uses data from 25 listed banks in China to calculate specific deposit premiums and analyzes the premium characteristics under different pricing models.Finally,this article uses the calculated premium data as the dependent variable to study the specific impact of systemic risk-related factors on deposit insurance prices.The following conclusions can be drawn from this article.When considering the uncertainty factor of Knight,the deposit insurance premium rate is no longer a fixed value,but represents a price range;The minimum price of deposit premium decreases with the increase of Knight uncertainty parameter,the maximum price increases with the increase of uncertainty parameter,and the interval length shows a continuous increasing trend with the increase of parameter;When systematic risk factors are included in the pricing model,there is a significant increase in both the minimum and maximum prices of the deposit premium,and the deposit premium continues to increase with the increase of confidence level;The premium results calculated by Merton model,Ronn-Verma model,model considering Knight uncertainty,and model considering Knight uncertainty and systemic risk increase sequentially,and the introduction of Knight uncertainty and systemic risk factors does not change the order of deposit premiums in various banks;The deposit premium considering systemic risk factors increases with the increase of systemic risk,while the deposit premium without considering systemic risk is not significantly related to systemic risk parameters.Therefore,when pricing deposit insurance,systematic risk should be considered.