Pricing and simulations of catastrophe bonds

<?xml version="1.0" encoding="UTF-8"?><collection xmlns="http://www.loc.gov/MARC21/slim" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:schemaLocation="http://www.loc.gov/MARC21/slim http://www.loc.gov/standards/marcxml/schema/MARC21slim.xsd">
  <record>
    <leader>00000cab a2200000   4500</leader>
    <controlfield tag="001">MAP20130005966</controlfield>
    <controlfield tag="003">MAP</controlfield>
    <controlfield tag="005">20130419145512.0</controlfield>
    <controlfield tag="008">130219e20130107esp|||p      |0|||b|spa d</controlfield>
    <datafield tag="040" ind1=" " ind2=" ">
      <subfield code="a">MAP</subfield>
      <subfield code="b">spa</subfield>
      <subfield code="d">MAP</subfield>
    </datafield>
    <datafield tag="084" ind1=" " ind2=" ">
      <subfield code="a">6</subfield>
    </datafield>
    <datafield tag="100" ind1="1" ind2=" ">
      <subfield code="0">MAPA20130002392</subfield>
      <subfield code="a">Nowak, Piotr</subfield>
    </datafield>
    <datafield tag="245" ind1="1" ind2="0">
      <subfield code="a">Pricing and simulations of catastrophe bonds</subfield>
      <subfield code="c">Piotr Nowak, Maciej Romaniuk</subfield>
    </datafield>
    <datafield tag="520" ind1=" " ind2=" ">
      <subfield code="a">The increasing number of natural catastrophes like floods, hurricanes, and earthquakes not only causes many victims, but also leads to severe production, infrastructure, and individual property losses. Classic insurance mechanisms may be inadequate for dealing with such losses because of the dependencies that exist, inter alia, between the sources of the losses, the huge values of claims, and problems with adverse selection and moral hazard. To cope with the dramatic consequences of extreme events, new financial and insurance instruments are required. One example of a catastrophe-linked security is the catastrophe bond (cat bond), also known as the Act-of-God bond. In this paper we price some catastrophe bonds. We apply models of the risk-free spot interest rate under the assumption that the occurrence of the catastrophe is independent of financial market behavior. We then use Monte Carlo simulations to analyze the numerical properties of the pricing formulas thus obtained. We make a twofold contribution to the literature of catastrophe bond pricing. First, we prove a general pricing formula, which can be applied to cat bonds with different payoff functions under the assumption of different models of the risk-free spot interest rate. Second, we price some new types of cat bonds with interest rate dynamics described by the CIR and the Hull-White model.</subfield>
    </datafield>
    <datafield tag="650" ind1=" " ind2="1">
      <subfield code="0">MAPA20080600204</subfield>
      <subfield code="a">Catástrofes naturales</subfield>
    </datafield>
    <datafield tag="650" ind1=" " ind2="1">
      <subfield code="0">MAPA20080608606</subfield>
      <subfield code="a">Simulación Monte Carlo</subfield>
    </datafield>
    <datafield tag="650" ind1=" " ind2="1">
      <subfield code="0">MAPA20080602437</subfield>
      <subfield code="a">Matemática del seguro</subfield>
    </datafield>
    <datafield tag="650" ind1=" " ind2="1">
      <subfield code="0">MAPA20080615277</subfield>
      <subfield code="a">Riesgos de la naturaleza</subfield>
    </datafield>
    <datafield tag="650" ind1=" " ind2="1">
      <subfield code="0">MAPA20080586447</subfield>
      <subfield code="a">Modelo estocástico</subfield>
    </datafield>
    <datafield tag="650" ind1=" " ind2="1">
      <subfield code="0">MAPA20080538279</subfield>
      <subfield code="a">Bonos</subfield>
    </datafield>
    <datafield tag="700" ind1="1" ind2=" ">
      <subfield code="0">MAPA20130004921</subfield>
      <subfield code="a">Romaniuk, Maciej</subfield>
    </datafield>
    <datafield tag="773" ind1="0" ind2=" ">
      <subfield code="w">MAP20077100574</subfield>
      <subfield code="t">Insurance : mathematics and economics</subfield>
      <subfield code="d">Oxford : Elsevier, 1990-</subfield>
      <subfield code="x">0167-6687</subfield>
      <subfield code="g">07/01/2013 Volumen 52 Número 1  - enero 2013 , p. 18-28</subfield>
    </datafield>
  </record>
</collection>