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The Drivers of Cat Bond Spread in the Primary Market

Author

Listed:
  • Massimo Mariani
  • Paola Amoruso
  • Raffaele Didonato
  • Alessandra Caragnano

Abstract

The current paper presents an empirical analysis concerning the cat bond spread determinants at the time of issue, to evaluate potential drivers of catastrophe bond prices in the primary market. Starting from the framework description following the main branch of existing literature in this field, the statistical significance of various determinants on the pricing of cat bond is measured, paying attention to a factor representative of economic and financial circumstances and market conditions in general, consequently not associated with the catastrophe risk, namely Libor; it will be considered in order to verify the absence of influence of risk free rate on spread in the primary market. The results achieved provide insight in understanding variation of catastrophe risk prices, by taking into account term structure as well as external conditions, thus evaluating which potential spread determinants could help to improve the explanatory power of an econometric pricing model.

Suggested Citation

  • Massimo Mariani & Paola Amoruso & Raffaele Didonato & Alessandra Caragnano, 2018. "The Drivers of Cat Bond Spread in the Primary Market," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(2), pages 1-65, January.
    • Handle: RePEc:ibn:ijbmjn:v:13:y:2018:i:2:p:65
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    References listed on IDEAS

    as
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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