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Deposit Insurance Modeling Based on Standard Power Option Payoff Using Picard–Lindelöf Iteration

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  • S. O. Edeki

    (Department of Mathematics, Dennis Osadebay University, Asaba, Nigeria†Department of Science and Engineering, Novel Global Community Educational Foundation, Hebersham, Australia‡Covenant Applied Informatics and Communications-African, Centre of Excellence, Covenant University, Ota, Nigeria)

  • V. E. Azu-Nwosu

    (�Department of Mathematics, Covenant University, Ota, Nigeria)

Abstract

Deposit insurance is a critical instrument in modern financial systems for protecting depositors’ interests and promoting financial stability. The deposit insurance finance model, which is based on the standard power option pay-off, has been considered in this paper using the Picard–Lindelöf Iteration Method (PIM). Utilizing the repetitive framework of the Picard–Lindelöf iteration approach offers insights into the dynamic behavior of deposit insurance premiums and risk assessments. The study highlights the significance of using the Picard iteration technique to better understand deposit insurance pricing and its implications for financial institutions and regulatory bodies.

Suggested Citation

  • S. O. Edeki & V. E. Azu-Nwosu, 2024. "Deposit Insurance Modeling Based on Standard Power Option Payoff Using Picard–Lindelöf Iteration," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-16, September.
    • Handle: RePEc:wsi:afexxx:v:19:y:2024:i:03:n:s2010495224500131
    DOI: 10.1142/S2010495224500131
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    More about this item

    Keywords

    Deposit insurance; option pricing; Black–Scholes model; Picard iteration;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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