A Method for Estimating the Price of Stablecoin Insurance

By Stefan A. Jacewitz and Chris Acker · Federal Reserve Bank of Kansas City · 2024 · CFE201-116-27

A Federal Reserve Bank of Kansas City Economic Review article of 20 June 2024 that estimates the cost of guaranteeing against stablecoin losses using standard option pricing methods as applied to bank deposit insurance. For four major (unnamed) stablecoins it estimates the annualized cost of a 90-day guarantee at between nearly zero and almost $0.13 per dollar of stablecoins.

On the syllabus

Exam CFE-201 — outcomes 4a, 4b.

Introduction

I Comparing Stablecoins with Bank Deposits

II Pricing Stablecoin Deposit Insurance

III Estimates of the Cost of Stablecoin Deposit Insurance

Conclusion

Appendix: The Merton, Black, Scholes Model

Endnotes

References

Sources

A Method for Estimating the Price of Stablecoin Insurance (Federal Reserve Bank of Kansas City, Economic Review, 20 June 2024) — the document: title, authors, date, summary and the section headings
CFE 201 Syllabus, Mar 2027/Jul 2027 (SOA) — the reading (CFE201-116-27) and its learning outcomes
CFE 201 Introductory Study Note, March 2027 (SOA) — the study-note code CFE201-116-27 and its title