The Value of the Liability Insurance for CS and UBS

Using an options-based approach, we compute the value of the state guaranteefor the liability side of CS and UBS. The insurance premiums forthese two system-relevant banks are calculated in a dynamic setup from2004 until 2009 in quarterly steps for time horizons of one and five years.The model captures the characteristics of the current financial crisis anddetects the bailout of UBS. Strengthened capital requirements and increasednumber of audits reduce the guarantee value substantially.[...]