Deposit Insurance Modeling Based on Standard Power Option Payoff Using Picard–Lindelöf Iteration

S. O. Edeki and V. E. Azu-Nwosu ()
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S. O. Edeki: Department of Mathematics, Dennis Osadebay University, Asaba, Nigeria†Department of Science and Engineering, Novel Global Community Educational Foundation, Hebersham, Australia‡Covenant Applied Informatics and Communications-African, Centre of Excellence, Covenant University, Ota, Nigeria
V. E. Azu-Nwosu: �Department of Mathematics, Covenant University, Ota, Nigeria

Annals of Financial Economics (AFE), 2024, vol. 19, issue 03, 1-16

Abstract: Deposit insurance is a critical instrument in modern financial systems for protecting depositors’ interests and promoting financial stability. The deposit insurance finance model, which is based on the standard power option pay-off, has been considered in this paper using the Picard–Lindelöf Iteration Method (PIM). Utilizing the repetitive framework of the Picard–Lindelöf iteration approach offers insights into the dynamic behavior of deposit insurance premiums and risk assessments. The study highlights the significance of using the Picard iteration technique to better understand deposit insurance pricing and its implications for financial institutions and regulatory bodies.

Keywords: Deposit insurance; option pricing; Black–Scholes model; Picard iteration (search for similar items in EconPapers)
JEL-codes: C62 G22 G24 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S2010495224500131

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