Sensitivity analysis of bank deposit insurance based on Merton pricing model

The theoretical basis of deposit insurance pricing quantitative method is discussed based on Merton option pricing model, which proceed with sensitivity analysis from three aspects. In terms of capital ratio change, the proportion of bank asset to deposit is negatively correlated with the insured amount per yuan of deposit, Gamma sensitively represent the ratio of Delta change to bank capital ratio change. In perspective of standard deviation of bank asset return, Vega value embodies increment tendency, indicating the change reaction of deposit insurance price is more sensitive to fluctuation rate. From the view of financial supervision interval time, Theta value shows the deposit insurance option value is positively correlated with T. In case long-term deposit of bank accounts for large proportion, it is necessary to levy higher insurance premium upon the bank. Finally in combination with the practice in China, average level of deposit premium rate of bank is calculated, and the risk pricing method is discussed briefly.