Developing Countries Spreading Covariant Risk Into International Risk Markets: Subsidised Catastrophe Bonds Or Reinsurance, Or Disaster Assistance?
AbstractPoor developing countries, faced with high levels of covariant risk ideally should spread this risk into the international risk market. How might this best be done - given that through diversification this market will tend to gain from absorbing this risk? Conglomerates of intermediate financial institutions may need to be formed in developing countries to acquire risk-transfer financial instruments. The preferred instrument is subsidised catastrophe bonds and not reinsurance or lump-sum foreign disaster assistance. Numerical analysis is employed as part of the demonstration of this point. Disaster foreign aid also should take the form of subsidising the issuing of catastrophe bonds by developing countries.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2008-492.
Length: 65 Pages
Date of creation: Apr 2008
Date of revision:
Find related papers by JEL classification:
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
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