IDEAS home Printed from https://ideas.repec.org/a/hin/jnljam/8942050.html
   My bibliography  Save this article

An Optimal Investment Strategy and Multiperiod Deposit Insurance Pricing Model for Commercial Banks

Author

Listed:
  • Grant E. Muller

Abstract

We employ the method of stochastic optimal control to derive the optimal investment strategy for maximizing an expected exponential utility of a commercial bank’s capital at some future date . In addition, we derive a multiperiod deposit insurance (DI) pricing model that incorporates the explicit solution of the optimal control problem and an asset value reset rule comparable to the typical practice of insolvency resolution by insuring agencies. By way of numerical simulations, we study the effects of changes in the DI coverage horizon, the risk associated with the asset portfolio of the bank, and the bank’s initial leverage level (deposit-to-asset ratio) on the DI premium while the optimal investment strategy is followed.

Suggested Citation

  • Grant E. Muller, 2018. "An Optimal Investment Strategy and Multiperiod Deposit Insurance Pricing Model for Commercial Banks," Journal of Applied Mathematics, Hindawi, vol. 2018, pages 1-10, May.
    • Handle: RePEc:hin:jnljam:8942050
    DOI: 10.1155/2018/8942050
    as

    Download full text from publisher

    File URL: http://downloads.hindawi.com/journals/JAM/2018/8942050.pdf
    Download Restriction: no
    File URL: http://downloads.hindawi.com/journals/JAM/2018/8942050.xml
    Download Restriction: no
    File URL: https://libkey.io/10.1155/2018/8942050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hin:jnljam:8942050. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mohamed Abdelhakeem (email available below). General contact details of provider: https://www.hindawi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.