Accuracy of premium calculation models for CAT bonds: An empirical analysis
AbstractCAT bonds are of significant importance in the field of alternative risk transfer. Since the market of CAT bonds is not complete, the application of an appropriate pricing model is of high relevance. We apply different premium calculation models in order to compare them with regard to their predictive power. Without taking the financial crisis into account, a version of the Wang transformation model and the linear model are the most accurate ones. In contrast, under consideration of the financial crisis, all analyzed models are approximately equivalent. Furthermore, we find that CAT bond specific information does not improve out-of-sample results. --
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Bibliographic InfoPaper provided by Technische Universität Braunschweig, Institute of Finance in its series Working Papers with number IF29V4.
Date of creation: 2009
Date of revision:
CAT Bonds; Alternative Risk Transfer; Premium Calculation Models; Empirical Analysis;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
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