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QMC techniques for CAT bond pricing

Author

Listed:
  • Albrecher Hansjörg

    (Graz University of Technology, Department of Mathematics, Steyrergasse 30, A-8010 Graz, Austria. E-mail: albrecher@tugraz.at)

  • Hartinger Jürgen

    (Graz University of Technology, Department of Mathematics, Steyrergasse 30, A-8010 Graz, Austria. E-mail: hartinger@finanz.math.tugraz.at)

  • Tichy Robert F.

    (Graz University of Technology, Department of Mathematics, Steyrergasse 30, A-8010 Graz, Austria. E-mail: tichy@weyl.math.tugraz.at)

Abstract

Pricing of catastrophe bonds leads to integrals with discontinuous and formally infinite-dimensional integrands. We investigate the suitability of Quasi-Monte Carlo methods for the numerical evaluation of these integrals and develop several variance-reduction algorithms. Furthermore, the performance of Quasi-Monte Carlo sequences for asymptotically efficient rare event simulation is examined. Various numerical illustrations are given.

Suggested Citation

  • Albrecher Hansjörg & Hartinger Jürgen & Tichy Robert F., 2004. "QMC techniques for CAT bond pricing," Monte Carlo Methods and Applications, De Gruyter, vol. 10(3-4), pages 197-211.
    • Handle: RePEc:bpj:mcmeap:v:10:y:2004:i:3-4:p:197-211:n:1002
    DOI: 10.1515/mcma.2004.10.3-4.197
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