Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model
| Autor: | Huiwen Zou, Wen Chao |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2018 |
| Předmět: |
050208 finance
Article Subject Moral hazard lcsh:Mathematics Bond 05 social sciences Stochastic game 02 engineering and technology lcsh:QA1-939 Copula (probability theory) Catastrophe bond Bond valuation Modeling and Simulation 0502 economics and business 0202 electrical engineering electronic engineering information engineering Econometrics Economics 020201 artificial intelligence & image processing Coupon Extreme value theory |
| Zdroj: | Discrete Dynamics in Nature and Society, Vol 2018 (2018) |
| ISSN: | 1026-0226 |
| DOI: | 10.1155/2018/5068480 |
| Popis: | Catastrophe events are attracting increased attention because of their devastating consequences. Aimed at the nonlinear dependency and tail characteristics of different triggered indexes of multiple-event catastrophe bonds, this paper applies Copula function and the extreme value theory to multiple-event catastrophe bond pricing. At the same time, floating coupon and principal payoff structures are adopted instead of fixed coupon and principal payoff structures, to reduce moral hazard and improve bond attractiveness. Furthermore, we develop a CIR-Copula-POT bond pricing model with CIR stochastic rate and estimate flood multiple-event triggered catastrophe bond price using Monte Carlo simulation method. Finally, we implement the sensitivity analysis to show how catastrophe intensity, maturity date, and the dependence affect the prices of catastrophe bonds. |
| Databáze: | OpenAIRE |
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