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Liquidity Management and Futures Hedging Under Deposit Insurance: an Option-Based Analysis
Yugoslav journal of operations research, Tome 14 (2004) no. 2, p. 209 Cet article a éte moissonné depuis la source eLibrary of Mathematical Institute of the Serbian Academy of Sciences and Arts

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Theories on financial futures hedging are generally based on a portfolio-choice approach. This paper presents an alterative: a firm-theoretic model of bank behavior with financial futures under deposit insurance. Assuming that the bank is a certificate of deposit (CD) rate-setter and faces random CDs, expressions for the optimal futures hedge are derived under the option-based valuation. When the bank is in a bad state of the world, a decrease in the short position of the futures decreases the loan rate and increases the CD rate; an increase in the deposit insurance premium increases the loan rate and decreases the CD rate. We also show that the bank’s amount of futures increases with a lower expected futures interest rate.
Classification : G13 G21
Keywords: Liquidity, futures, deposit insurance, Black-Scholes valuation. 
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     author = {Jyh-Horng Lin and Chuen-Ping Chang},
     title = {Liquidity {Management} and {Futures} {Hedging} {Under} {Deposit} {Insurance:} an {Option-Based} {Analysis}},
     journal = {Yugoslav journal of operations research},
     pages = {209 },
     year = {2004},
     volume = {14},
     number = {2},
     zbl = {1085.91027},
     language = {en},
     url = {http://geodesic.mathdoc.fr/item/YJOR_2004_14_2_a4/}
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Jyh-Horng Lin; Chuen-Ping Chang. Liquidity Management and Futures Hedging Under Deposit Insurance: an Option-Based Analysis. Yugoslav journal of operations research, Tome 14 (2004) no. 2, p. 209 . http://geodesic.mathdoc.fr/item/YJOR_2004_14_2_a4/