Victor Vaugirard () (TEAM-CNRS University of Paris at Sorbonne)
Abstract
This paper shows that pricing catastrophe bonds boils down to computing first-passage time distributions of jump-diffusion processes. It derives a generic valuation expression by assuming that the jump risk is not systematic and then performs simulations, which can stress the sensitivity of insurance bond values to changes in underlying parameters.
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Article provided by Economics Bulletin in its journal Economics Bulletin.
Volume (Year): 7 (2004) Issue (Month): 2 () Pages: 1-7 Download reference. The following formats are available: HTML,
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Handle: RePEc:ebl:ecbull:v:7:y:2004:i:2:p:1-7
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Find related papers by JEL classification: G1 - Financial Economics - - General Financial Markets C6 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming
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