An Optimal Investment Strategy and Multiperiod Deposit Insurance Pricing Model for Commercial Banks

Algorithm 1

An algorithm for the Monte Carlo simulation method used to estimate .

While generating 1,000,000 sets, each consisting of a pair of sample paths for and on the interval ,

DO

At each , where and are positive integers:

Calculate the payoff for each set consisting of the sample paths of and .

Using all the sets of sample paths of and , calculate the average of the payoffs as

a proxy to .

Discount the proxy to time zero by multiplying it by .

END

Sum the values of all the discounted proxies calculated at times , where .

Divide the sum of the discounted proxies by .