Alternative Pricing Models of Deposit Insurance under Capital Forbearance

In this paper, we present alternative pricing models of deposit insurance under capital forbearance. The investment behavior of deposit insurance companies and moral hazard of banks are considered and numerical analysis is carried out. We find that If the premium rate reflects forecasting instead of merely assessing the liability in determining premium rate, and considering the effect of the relationship between deposit’s interest rate and insolvency risk of banks, this can help decrease this moral hazard created after the issuance of the insurance contract.