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Pricing of Islamic deposit insurance

Author

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  • Sabah, Nasim
  • Hassan, M. Kabir

Abstract

We present an Islamic deposit insurance model with both government and private insurers. We show that government insurer provides strong incentives for banks to take excessive systematic risks, and private insurers can eliminate such incentives by charging a higher fee.

Suggested Citation

  • Sabah, Nasim & Hassan, M. Kabir, 2019. "Pricing of Islamic deposit insurance," Economics Letters, Elsevier, vol. 178(C), pages 91-94.
    • Handle: RePEc:eee:ecolet:v:178:y:2019:i:c:p:91-94
    DOI: 10.1016/j.econlet.2019.01.013
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    References listed on IDEAS

    as
    1. Darrell Duffie & Robert Jarrow & Amiyatosh Purnanandam & Wei Yang, 2008. "Market Pricing of Deposit Insurance," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 22, pages 551-577, World Scientific Publishing Co. Pte. Ltd..
    2. George Pennacchi, 1999. "The Effects of Setting Deposit Insurance Premiums to Target Insurance Fund Reserves," Journal of Financial Services Research, Springer;Western Finance Association, vol. 16(2), pages 153-180, December.
    3. Pennacchi, George, 2006. "Deposit insurance, bank regulation, and financial system risks," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 1-30, January.
    4. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    5. Viral V. Acharya & João A. C. Santos & Tanju Yorulmazer, 2010. "Systemic risk and deposit insurance premiums," Economic Policy Review, Federal Reserve Bank of New York, vol. 16(Aug), pages 89-99.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Wang Tong & Muhammad Ali & Chin-Hong Puah & Choi-Meng Leong & Xiao Yuping, 2024. "Islamic insurance: a review and research agenda," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(4), pages 1464-1486, December.
    2. Khan, Abdullah & Rizvi, Syed Aun R. & Ali, Mohsin & Haroon, Omair, 2021. "A survey of Islamic finance research – Influences and influencers," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).

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    More about this item

    Keywords

    Islamic deposit insurance; Banking regulation; Risk-based premium; Systematic risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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