Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach

Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach

This paper proposes a method for continuous-time random modeling of loss indextriggeredcatastrophe bonds (cat bonds) that simplifies both rating and pricing throughouttheir maturity period. This index is based on the amount of declared losses calculated as thedifference between the total amount of t...

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Main Author: María José Pérez-Fructuoso
Format: Article
Language:English
Published: OmniaScience 2017-10-01
Series:Harvard Deusto Business Research
Online Access:http://www.hdbresearch.com/index.php/hdbr/article/view/64
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spelling doaj-b4c2b74285754ae99888c8b0151482e92020-11-25T00:47:07ZengOmniaScienceHarvard Deusto Business Research2254-62352017-10-01628410110.3926/hdbr.6464Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous ApproachMaría José Pérez-Fructuoso0Universidad a Distancia de Madrid (UDIMA)This paper proposes a method for continuous-time random modeling of loss indextriggeredcatastrophe bonds (cat bonds) that simplifies both rating and pricing throughouttheir maturity period. This index is based on the amount of declared losses calculated as thedifference between the total amount of the catastrophe and that of incurred-but-not-yetreportedlosses, which is modeled by means of a geometric Wiener process. Thefundamental assumption of this model lies in considering that this amount decreasesproportionally to a function, hereby called the mixed-rate of claims statement, whichrepresents the pace of claim statements as growing linearly up to a certain moment, afterwhich it becomes constant until the bond reaches maturity.http://www.hdbresearch.com/index.php/hdbr/article/view/64
collection DOAJ
language English
format Article
sources DOAJ
author María José Pérez-Fructuoso
spellingShingle María José Pérez-Fructuoso
Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach
Harvard Deusto Business Research
author_facet María José Pérez-Fructuoso
author_sort María José Pérez-Fructuoso
title Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach
title_short Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach
title_full Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach
title_fullStr Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach
title_full_unstemmed Modeling Loss Index Triggers for Catastrophe (Cat) Bonds: An Alternative Continuous Approach
title_sort modeling loss index triggers for catastrophe (cat) bonds: an alternative continuous approach
publisher OmniaScience
series Harvard Deusto Business Research
issn 2254-6235
publishDate 2017-10-01
description This paper proposes a method for continuous-time random modeling of loss indextriggeredcatastrophe bonds (cat bonds) that simplifies both rating and pricing throughouttheir maturity period. This index is based on the amount of declared losses calculated as thedifference between the total amount of the catastrophe and that of incurred-but-not-yetreportedlosses, which is modeled by means of a geometric Wiener process. Thefundamental assumption of this model lies in considering that this amount decreasesproportionally to a function, hereby called the mixed-rate of claims statement, whichrepresents the pace of claim statements as growing linearly up to a certain moment, afterwhich it becomes constant until the bond reaches maturity.
url http://www.hdbresearch.com/index.php/hdbr/article/view/64
work_keys_str_mv AT mariajoseperezfructuoso modelinglossindextriggersforcatastrophecatbondsanalternativecontinuousapproach
_version_ 1725261882074333184

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