Explaining the Spreads on Catastrophe Bonds

• Main Authors: Hsiang-Yu Shih, 施翔宇
• Other Authors: Larry Tzeng
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/21142204027652608454

碩士 === 國立臺灣大學 === 財務金融學研究所 === 94 === The study attempts to explain the spreads over three-month LIBOR rates on catastrophe bonds using regression models. Transactions from 1997 to 2005 are all analyzed by two empirical pricing models, namely the log LFC Model and Aggregate Model. Analytical results indicate that spreads are explained by frequency and severity of loss, size of issue, numbers of perils and non-investment grade rating. However, the role of trigger types is not supported sufficiently. The proposed Aggregate Model generates more accurate estimates for actual spreads than log LFC Model.