Document Type : Research Paper
Author
Assistant Professor, University of Allame Tabatabae’i
Abstract
Deposit insurance is a type of shelter for banks depositors. The main
purpose of this system is stabilization of financial market and
providing a situation that small and fragile bank and deposit
institutions can survive in credit market. Appropriate pricing of
deposit insurance rate is necessary for realization of this goal. In this
paper we use Merton option pricing model for estimating deposit
insurance rate of some Iranian private banks. For this purpose, first,
banks asset value and its variance that are unobserved, were estimated
with specification of maximum likelihood function. Then deposit
insurance price of each bank based on their risks were calculated. We
found banking deposit insurance premium and risk are growing. In
some years, estimated deposit insurance premium unusually was very
high. This fact can be due to two events: first ratio in this year was
high, which means debt to equity ratio was high. Secend, banks value
variance were high. Other finding of this study is that deposit
insurance premium of Iranian banks are different. This fact shows that
these banks have different risk levels so, with respect to differences in
deposit insurance premium of each bank, this paper recommends that
deposit insurance system in Iran should be based on their risk levels.
Keywords
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