Abstract
This paper develops an option-based model to analyze the relationship between two insurances, both providing protection against bank failures. One of these insurances is offered to European banks by the Single Resolution Fund on a compulsory basis in return for their contributions to the Fund, while the other is by the CDS market. The model provides a theoretical framework for testing whether the contributions of banks are fair in the Coasian sense relative to the CDS spreads.
Authors
- Anna Naszodi
JEL codes
- G28
- G13