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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2025
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2512.08890 |
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| _version_ | 1866917135439101952 |
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| author | Burnecki, Krzysztof Teuerle, Marek Zdeb, Martyna |
| author_facet | Burnecki, Krzysztof Teuerle, Marek Zdeb, Martyna |
| contents | The insurance-linked securities (ILS) market, as a form of alternative risk transfer, has been at the forefront of innovative risk-transfer solutions. The catastrophe bond (CAT bond) market now represents almost half of the entire ILS market and is growing steadily. Since CAT bonds are often tied to risks in different regions, we follow this idea by constructing different pricing models that incorporate various scenarios of dependence between catastrophe losses in different areas. Namely, we consider independent, proportional, and arbitrary two-dimensional distribution cases. We also derive a normal approximation of the prices. Finally, to include the market price of risk, we apply Wang's transform. We illustrate the differences between the scenarios and the performance of the approximation on the Property Claim Services data. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_08890 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Modelling and valuation of catastrophe bonds across multiple regions Burnecki, Krzysztof Teuerle, Marek Zdeb, Martyna Pricing of Securities The insurance-linked securities (ILS) market, as a form of alternative risk transfer, has been at the forefront of innovative risk-transfer solutions. The catastrophe bond (CAT bond) market now represents almost half of the entire ILS market and is growing steadily. Since CAT bonds are often tied to risks in different regions, we follow this idea by constructing different pricing models that incorporate various scenarios of dependence between catastrophe losses in different areas. Namely, we consider independent, proportional, and arbitrary two-dimensional distribution cases. We also derive a normal approximation of the prices. Finally, to include the market price of risk, we apply Wang's transform. We illustrate the differences between the scenarios and the performance of the approximation on the Property Claim Services data. |
| title | Modelling and valuation of catastrophe bonds across multiple regions |
| topic | Pricing of Securities |
| url | https://arxiv.org/abs/2512.08890 |