Is Fairly Priced Deposit Insurance Possible?

Yuk-Shee Chan, Stuart I Greenbaum and Anjan Thakor ()

Journal of Finance, 1992, vol. 47, issue 1, 227-45

Abstract: The authors analyze risk-sensitive, incentive-compatible deposit insurance in the presence of private information and moral hazard. Without deposit-linked subsidies, it is impossible to implement risk-sensitive, incentive-compatible deposit insurance pricing in a competitive, deregulated environment except when the deposit insurer is the least risk averse agent in the economy. The authors establish this formally in the context of an insurance scheme in which privately informed depository institutions are offered deposit insurance premia contingent on reported capital; the result holds for alternative sorting instruments as well. This suggests a contradiction between deregulation and fairly priced, risk-sensitive deposit insurance. Copyright 1992 by American Finance Association.

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (181)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1082%2819920 ... O%3B2-I&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:47:y:1992:i:1:p:227-45

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().