A loss default simulation model of the federal bank deposit insurance funds

Author

Bennett, Rosalind L. ; Nuxoll, Daniel A. ; Jarrow, Robert A. ; Fu, Michael C. ; Zhang, Huiju

Author_Institution

FDIC, Washington, DC, USA

fYear

2005

fDate

4-7 Dec. 2005

Abstract

This paper discusses a simulation model that is used in a martingale valuation approach to measure and value the risk of the FDIC deposit insurance funds. The FDIC insurance funds capitalize a portfolio of insurance policies, each issued to depositors of an individual commercial bank. To evaluate this portfolio, our methodology evaluates the insurance policies for depositors at each individual bank and aggregates to obtain the risk of the entire portfolio. To adequately model the risks associated with credit, interest rate, deposit growth, and loss rate, a multidimensional system is formulated. The risk measurement and valuation results are based on Monte Carlo simulation of the system risks.

Keywords

Monte Carlo methods; banking; insurance; risk management; FDIC deposit insurance fund; Monte Carlo simulation; commercial bank; credit risk measurement; default simulation model; federal bank deposit insurance fund; insurance policy portfolio; martingale valuation; multidimensional system; system risk; Aggregates; Business; Cost accounting; Economic indicators; Insurance; Multidimensional systems; Portfolios; Reactive power; Regulators; Risk management;

fLanguage

English

Publisher

ieee

Conference_Titel

Simulation Conference, 2005 Proceedings of the Winter

Print_ISBN

0-7803-9519-0

Type

conf

DOI

10.1109/WSC.2005.1574459

Filename

1574459