Catastrophe Bond Pricing based on Behavior Model

S. Liu, L. Han (PRC), Y. Ermoliev, and T. Ermolieva (Austria)


Catastrophe Bond, Pricing, Behavior Model, Monte-Carlo Simulation


Although the catastrophe bond is used more and more widely, the pricing is not so satisfactory because of its catastrophe-depending characteristics. In this paper, we propose a new behavior model to get the so-called fair price of catastrophe bond considering both the issuer’s and government’s benefit. This proposed approach supports calculation of the coupon rate and volume scale for a given class of catastrophe bond, and one of the simulation results of the model is shown in this paper.

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