Deposit Insurance Premium under Stochastic Interest Rate: An Empirical Study of Taiwan's Banks

• Main Authors: Yi-Chun Lin, 林怡君
• Other Authors: Min-Teh Yu
• Format: Others
• Language: en_US
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/35329616503425556383

碩士 === 元智大學 === 財務金融研究所 === 91 === This empirical study of Taiwan’s banks applies the two-step maximum likelihood estimation method of Duan and Simonato (2002) to evaluate deposit insurance premium under stochastic interest rate. Since there have been only two zero-coupon bonds in Taiwan, the 90-day commercial paper is used as proxy. The empirical results show the fixed-rate deposit insurance premiums charged by the CDIC are lower than the risk-adjusted market values. The estimates of deposit insurance premiums of this study are much higher than those of the modified Ronn-Verma method because of the interest-rate-irrelevant risk and are either higher or lower than those of the Ronn-Verma with MLE due to stochastic interest rate. As for the size effect, the results express the smaller banks have higher estimates of interest-rate-irrelevant risk, asset volatility, and insurance premiums, and vice versa.