IDEAS home Printed from https://ideas.repec.org/a/cup/astinb/v40y2010i01p307-329_00.html
   My bibliography  Save this article

Pricing of Reinsurance Contracts in the Presence of Catastrophe Bonds

Author

Listed:
  • Haslip, Gareth G.
  • Kaishev, Vladimir K.

Abstract

A methodology for pricing of reinsurance contracts in the presence of a catastrophe bond is developed. An important advantage of this approach is that it allows for the pricing of reinsurance contracts consistent with the observed market prices of catastrophe bonds on the same underlying risk process. Within the proposed methodology, an appropriate financial pricing formula is derived, under a market implied risk neutral probability measure for both a catastrophe bond and an aggregate excess of loss reinsurance contract, using a generalised Fourier transform. Efficient numerical methods for the evaluation of this formula, such as the Fast Fourier transform and Fractional Fast Fourier transform, are considered. The methodology is illustrated on several examples including Pareto and Gamma claim severities.

Suggested Citation

  • Haslip, Gareth G. & Kaishev, Vladimir K., 2010. "Pricing of Reinsurance Contracts in the Presence of Catastrophe Bonds," ASTIN Bulletin, Cambridge University Press, vol. 40(1), pages 307-329, May.
    • Handle: RePEc:cup:astinb:v:40:y:2010:i:01:p:307-329_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0515036100000489/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Spyridon M. Tzaninis & Nikolaos D. Macheras, 2020. "A characterization of progressively equivalent probability measures preserving the structure of a compound mixed renewal process," Papers 2007.05289, arXiv.org, revised Jul 2020.
    2. Denis-Alexandre Trottier & Van Son Lai, 2017. "Reinsurance or CAT Bond? How to Optimally Combine Both," Working Papers 2017-003, Department of Research, Ipag Business School.
    3. Beer, Simone & Braun, Alexander, 2022. "Market-consistent valuation of natural catastrophe risk," Journal of Banking & Finance, Elsevier, vol. 134(C).
    4. Burnecki, Krzysztof & Giuricich, Mario Nicoló & Palmowski, Zbigniew, 2019. "Valuation of contingent convertible catastrophe bonds — The case for equity conversion," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 238-254.
    5. Sukono & Hafizan Juahir & Riza Andrian Ibrahim & Moch Panji Agung Saputra & Yuyun Hidayat & Igif Gimin Prihanto, 2022. "Application of Compound Poisson Process in Pricing Catastrophe Bonds: A Systematic Literature Review," Mathematics, MDPI, vol. 10(15), pages 1-19, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:astinb:v:40:y:2010:i:01:p:307-329_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/asb .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.