Deposit Insurance Modeling Based on Standard Power Option Payoff Using Picard–Lindelöf Iteration

Abstract

Deposit insurance is a critical instrument in modern financial systems for protecting depositors’ interests and promoting financial stability. The deposit insurance finance model, which is based on the standard power option pay-off, has been considered in this paper using the Picard–Lindelöf Iteration Method (PIM). Utilizing the repetitive framework of the Picard–Lindelöf iteration approach offers insights into the dynamic behavior of deposit insurance premiums and risk assessments. The study highlights the significance of using the Picard iteration technique to better understand deposit insurance pricing and its implications for financial institutions and regulatory bodies.