Working Paper
An Analysis of Bank Failures: 1984 To 1989
This paper models the regulatory decision to close a bank as a call option. A two-equation model of bank failure, which treats bank closings as regulatorily timed events, is constructed from the call option closure model and estimated for bank failures occurring from 1984 through 1989. Thetwo-equation model is also compared with two single-equation models in terms of both in-sample and out-of-sample predictive accuracy.
Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.
Suggested Citation
Thomson, James B. 1989. “An Analysis of Bank Failures: 1984 To 1989.” Federal Reserve Bank of Cleveland, Working Paper No. 89-16.
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