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The Value of the Liability Insurance for Credit Suisse and UBS

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  • Mario Häfeli
  • Matthias P. Jüttner

Abstract

Using an options-based approach, we compute the value of the state guarantee for the liability side of Credit Suisse and UBS. Insurance premiums for these two systemically important banks are calculated in a dynamic setup from 2004 through 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 an increased number of audits reduce the value of the guarantee substantially.

Suggested Citation

  • Mario Häfeli & Matthias P. Jüttner, 2012. "The Value of the Liability Insurance for Credit Suisse and UBS," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(4), pages 612-635, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201212)168:4_612:tvotli_2.0.tx_2-e
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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