Pricing of zero-coupon and coupon cat bonds
Volume 30 / 2003
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.
