Catastrophe Insurance Options: Are They Zero-Beta Assets?
PCS Catastrophe Insurance Options were released in 1995 as a means of providing property and casualty insurers with a method of hedging catastrophe exposures. The options are based on the Property Claims Services Office (PCS) index of catastrophe losses. Due to the fact that the underlying index is uncorrelated to movements in the capital markets, it is believed that PCS Catastrophe Insurance Options represent zero-beta assets. If this is true, then investment in catastrophe options provides investors with a way to further diversify the current asset portfolios, thereby improving portfolios’ reward-to-variability ratios. This study reviews actual PCS Catastrophe Insurance Options performance to assess whether the hypothesis that these contracts represent zero-beta assets is supported. In spite of relatively low liquidity in this market thus far, our results do suggest that the actual contracts do represent zero-beta assets.
Volume (Year): 22 (1999)
Issue (Month): 2 ()
|Contact details of provider:|| |
When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:22:y:1999:i:2:p:147-163. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.