IDEAS home Printed from https://ideas.repec.org/a/eee/insuma/v117y2024icp16-44.html
   My bibliography  Save this article

Optimal control under uncertainty: Application to the issue of CAT bonds

Author

Listed:
  • Baradel, Nicolas

Abstract

We propose a general framework for studying optimal issue of CAT bonds in the presence of uncertainty on the parameters. In particular, the intensity of arrival of natural disasters is inhomogeneous and may depend on unknown parameters. Given a prior on the distribution of the unknown parameters, we explain how it should evolve according to the classical Bayes rule. Taking these progressive prior-adjustments into account, we characterize the optimal policy through a quasi-variational parabolic equation, which can be solved numerically. We provide examples of application in the context of hurricanes in Florida.

Suggested Citation

  • Baradel, Nicolas, 2024. "Optimal control under uncertainty: Application to the issue of CAT bonds," Insurance: Mathematics and Economics, Elsevier, vol. 117(C), pages 16-44.
    • Handle: RePEc:eee:insuma:v:117:y:2024:i:c:p:16-44
    DOI: 10.1016/j.insmatheco.2024.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167668724000398
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.insmatheco.2024.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. David Landriault & Bin Li & Hong Li & Yuanyuan Zhang, 2024. "Contract Structure and Risk Aversion in Longevity Risk Transfers," Papers 2409.08914, arXiv.org.

    More about this item

    Keywords

    Optimal control; Uncertainty; Bayesian filtering; Cat bonds; Hurricanes;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

    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:eee:insuma:v:117:y:2024:i:c:p:16-44. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505554 .

    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.