This paper extends the existing literature on deposit insurance by proposing a new approach for the estimation of the loss distribution of a Deposit Insurance Scheme (DIS) that is based on the Basel 2 regulatory framework. In particular, we generate the distribution of banks’ losses following...

The relationship between the risk-neutral measure Q and the actual or real-world measure P, and the corresponding credit risk premium, are investigated in this paper. Quantifying and understanding the long-term average risk premium is important for a variety of financial applications and...

We examine recovery rates of the European banking sector. To this end, we employ information embedded in credit default swaps (CDS) with different levels of seniority. To estimate implied recovery rates, we extend the model of Schlafer and Uhrig-Homburg (2014) and include absolute priority...