The value of the liability insurance for Credit Suisse and UBS

Mario Haefeli and Matthias P. Juttner
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Mario Haefeli: University of Zurich and Swiss Finance Institute
Matthias P. Juttner: University of Zurich and Swiss Finance Institute

No 10-33, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using an options-based approach, we compute the value of the state guarantee for the liability side of Credit Suisse and UBS. The insurance premiums for these two system-relevant banks are calculated in a dynamic setup from 2004 until 2009 in quarterly steps for time horizons of one and five years. The model captures the characteristics of the current financial crisis and detects the bailout of UBS. Strengthened capital requirements and increased number of audits reduce the value of the guarantee substantially. The model implied CDS spreads are compared to the ones perceived by the market.

Keywords: Banking; Regulation; Option pricing (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-07, Revised 2010-07
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1033

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