Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2009-06-30
Number: 09-057/2
Author-Name: Stefan Arping
Author-Workplace-Name: University of Amsterdam
Title: The Pricing of Bank Debt Guarantees
Abstract: This discussion paper led to a publication in <A HREF="https://www.sciencedirect.com/science/article/pii/S0165176510001710">'Economics Letters'</A>, 2010, 108(2), 119-121.<p>

We analyze the optimal pricing of government-sponsored bank debt guarantees within the context of an asset substitution framework. We show that the desirability of fair pricing of guarantees depends on the degree of transparency of the banking sector: in relatively opaque banking systems, fair pricing exacerbates banks' incentive to take excessive risks, whereas the opposite is true in relatively transparent banking systems.
Classification-JEL: G21, G38
Keywords: Debt Guarantees, Fair Pricing, Financial Stability
File-Url: https://papers.tinbergen.nl/09057.pdf
File-Format: application/pdf
File-Size: 159462 bytes
Handle: RePEc:tin:wpaper:20090057