Market-Consistent Valuation of Natural Catastrophe Risk

Item Type Monograph (Working Paper)
Abstract

Natural catastrophe risk is increasingly covered through alternative capital instead of classical reinsurance. As most instruments in this space do not trade in a secondary market, their ongoing valuation poses a challenge to investors. We suggest extracting pricing information contained in regularly observed catastrophe bond quotes by means of a reduced form model. The resulting implied Poisson intensities are shown to materially depend on the time to maturity and modeled probability of first loss. Along these two dimensions, we estimate smooth hazard rate surfaces that allow investors to mark illiquid catastrophe risk contracts to market.

Authors Beer, Simone & Braun, Alexander
Language English
Subjects economics
finance
HSG Classification contribution to scientific community
Date 10 February 2021
Publisher SSRN
Official URL https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Depositing User Prof. Dr. Alexander Braun
Date Deposited 10 Feb 2021 11:42
Last Modified 11 Feb 2021 07:47
URI: https://www.alexandria.unisg.ch/publications/262323

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Beer, Simone & Braun, Alexander: Market-Consistent Valuation of Natural Catastrophe Risk. , 2021,

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https://www.alexandria.unisg.ch/id/eprint/262323
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