TITLE:
Estimating Probability Distribution of Asset Value Based on Dual Effects of Deposit Insurance with the Minimum Cross-Entropy Principle
AUTHORS:
Xiaoning Lv, Xuezhi Qin, Tao Sun
KEYWORDS:
Probability Distribution; Deposit Insurance; Dual Effects; Cross-Entropy
JOURNAL NAME:
Theoretical Economics Letters,
Vol.3 No.3A,
June
18,
2013
ABSTRACT:
A model is proposed to estimate the probability
distribution of asset value based on the benefit effects as well as the risk
effects of deposit insurance with the minimum cross-entropy principle. Three
scenarios are constructed to depict situations with different dual effects of
deposit insurance. The corresponding assets distribution functions are obtained
accordingly. The results show that it is positively correlated between the supervision
level and the risk aversion effects of deposit insurance. The increase of the
deposit insurance premium moves the bank’s assets distribution to the right
side although not significantly. The asset probability distributions estimated
in this paper can be taken as a reference for banks to choose the proper credit
investment projects.