Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model
Catastrophe events are attracting increased attention because of their devastating consequences. Aimed at the nonlinear dependency and tail characteristics of different triggered indexes of multiple-event catastrophe bonds, this paper applies Copula function and the extreme value theory to multiple-...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2018-01-01
|
| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2018/5068480 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1850212375936892928 |
|---|---|
| author | Wen Chao Huiwen Zou |
| author_facet | Wen Chao Huiwen Zou |
| author_sort | Wen Chao |
| collection | DOAJ |
| description | Catastrophe events are attracting increased attention because of their devastating consequences. Aimed at the nonlinear dependency and tail characteristics of different triggered indexes of multiple-event catastrophe bonds, this paper applies Copula function and the extreme value theory to multiple-event catastrophe bond pricing. At the same time, floating coupon and principal payoff structures are adopted instead of fixed coupon and principal payoff structures, to reduce moral hazard and improve bond attractiveness. Furthermore, we develop a CIR-Copula-POT bond pricing model with CIR stochastic rate and estimate flood multiple-event triggered catastrophe bond price using Monte Carlo simulation method. Finally, we implement the sensitivity analysis to show how catastrophe intensity, maturity date, and the dependence affect the prices of catastrophe bonds. |
| format | Article |
| id | doaj-art-8ea157baf0924a2f97fd697ca923ae6b |
| institution | OA Journals |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2018-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-8ea157baf0924a2f97fd697ca923ae6b2025-08-20T02:09:21ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2018-01-01201810.1155/2018/50684805068480Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT ModelWen Chao0Huiwen Zou1School of Economics and Management, Fuzhou University, Fuzhou 350116, ChinaSchool of Economics and Management, Fuzhou University, Fuzhou 350116, ChinaCatastrophe events are attracting increased attention because of their devastating consequences. Aimed at the nonlinear dependency and tail characteristics of different triggered indexes of multiple-event catastrophe bonds, this paper applies Copula function and the extreme value theory to multiple-event catastrophe bond pricing. At the same time, floating coupon and principal payoff structures are adopted instead of fixed coupon and principal payoff structures, to reduce moral hazard and improve bond attractiveness. Furthermore, we develop a CIR-Copula-POT bond pricing model with CIR stochastic rate and estimate flood multiple-event triggered catastrophe bond price using Monte Carlo simulation method. Finally, we implement the sensitivity analysis to show how catastrophe intensity, maturity date, and the dependence affect the prices of catastrophe bonds.http://dx.doi.org/10.1155/2018/5068480 |
| spellingShingle | Wen Chao Huiwen Zou Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model Discrete Dynamics in Nature and Society |
| title | Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model |
| title_full | Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model |
| title_fullStr | Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model |
| title_full_unstemmed | Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model |
| title_short | Multiple-Event Catastrophe Bond Pricing Based on CIR-Copula-POT Model |
| title_sort | multiple event catastrophe bond pricing based on cir copula pot model |
| url | http://dx.doi.org/10.1155/2018/5068480 |
| work_keys_str_mv | AT wenchao multipleeventcatastrophebondpricingbasedoncircopulapotmodel AT huiwenzou multipleeventcatastrophebondpricingbasedoncircopulapotmodel |