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3195. Modelling and pricing of multi-region catastrophe bonds
Invited abstract in session TD-2: New Tools in Insurance Risk Management , stream OR in Banking, Finance and Insurance: New Tools for Risk Management.
Tuesday, 14:30-16:00Room: Glassalen (building: 101)
Authors (first author is the speaker)
| 1. | Krzysztof Burnecki
|
| Faculty of Pure and Applied Mathematics, Wroclaw University of Science and Technology |
Abstract
The insurance-linked securities (ILS) market, as a form of alternative risk transfer, has been at the forefront of innovative risk-transfer solutions. The catastrophe bond (CAT bond) market now stands for almost half of the whole ILS market and is steadily growing. Since CAT bonds are often tied to risks in different regions, we follow this idea by constructing different pricing models that incorporate various scenarios of dependence between catastrophe losses in different areas. Namely, we consider independent, proportional, and arbitrary two dimensional distributions cases. We also derive normal approximations of the prices and compare them with prices obtained via bootstrapping. We find significant difference between those approaches. We believe that these findings can be helpful in modelling and pricing of other ILS tied to natural disasters. For illustration purposes we analyse Property Claim Services data.
Keywords
- Financial Modelling
- Stochastic Models
- Risk Analysis and Management
Status: accepted
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