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2018 An Optimal Investment Strategy and Multiperiod Deposit Insurance Pricing Model for Commercial Banks
Grant E. Muller
J. Appl. Math. 2018: 1-10 (2018). DOI: 10.1155/2018/8942050

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 T > 0 . 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.

Citation

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Grant E. Muller. "An Optimal Investment Strategy and Multiperiod Deposit Insurance Pricing Model for Commercial Banks." J. Appl. Math. 2018 1 - 10, 2018. https://doi.org/10.1155/2018/8942050

Information

Received: 3 November 2017; Revised: 14 February 2018; Accepted: 19 March 2018; Published: 2018
First available in Project Euclid: 13 June 2018

zbMATH: 07132108
MathSciNet: MR3801855
Digital Object Identifier: 10.1155/2018/8942050

Rights: Copyright © 2018 Hindawi

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