Pricing of zero-coupon and coupon cat bonds

Volume 30 / 2003

Krzysztof Burnecki, Grzegorz Kukla Applicationes Mathematicae 30 (2003), 315-324 MSC: 62P05, 62-07, 60G55, 60H30. DOI: 10.4064/am30-3-6

Abstract

We apply the results of Baryshnikov, Mayo and Taylor (1998) to calculate non-arbitrage prices of a zero-coupon and coupon CAT bond. First, we derive pricing formulae in the compound doubly stochastic Poisson model framework. Next, we study $10$-year catastrophe loss data provided by Property Claim Services and calibrate the pricing model. Finally, we illustrate the values of the CAT bonds tied to the loss data.

Authors

  • Krzysztof BurneckiHugo Steinhaus Center
    for Stochastic Methods
    Institute of Mathematics
    Wrocław University of Technology
    Wybrzeże Wyspiańskiego 27
    50-370 Wrocław, Poland
    e-mail
  • Grzegorz KuklaHugo Steinhaus Center
    for Stochastic Methods
    Institute of Mathematics
    Wrocław University of Technology
    Wybrzeże Wyspiańskiego 27
    50-370 Wrocław, Poland
    e-mail

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