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Utility indifference pricing of derivatives written on industrial loss indexes

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  • Gunther Leobacher
  • Philip Ngare

Abstract

We consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modelled by a compound Poisson process and the insurer can adjust her portfolio by choosing the risk loading, which in turn determines the demand. We compute the price of a CAT(spread) option written on that index using utility indifference pricing.

Suggested Citation

  • Gunther Leobacher & Philip Ngare, 2014. "Utility indifference pricing of derivatives written on industrial loss indexes," Papers 1404.0879, arXiv.org.
    • Handle: RePEc:arx:papers:1404.0879
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    References listed on IDEAS

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