Variable deposit insurance premiums revolutionize financial risk protection in Korea!
The article introduces a new way to calculate deposit insurance premiums for Korean financial institutions. Unlike the current system that charges a fixed rate, this new model considers the risk of each institution going bankrupt and allows for variable intervention times. By using a method based on options valuation, the researchers show that premiums can change based on factors like interest rates, asset volatility, and insurance duration. This means that institutions with higher risks may need to pay more for deposit insurance.