Application of Compound Poisson Process in Pricing Catastrophe Bonds: A Systematic Literature Review

Sukono, Hafizan Juahir, Riza Andrian Ibrahim, Moch Panji Agung Saputra, Yuyun Hidayat and Igif Gimin Prihanto
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Sukono: Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Jatinangor 45363, Indonesia
Hafizan Juahir: East Coast Environmental Research Institute (ESERI), Universiti Sultan Zainal Abidin, Kuala Terengganu 21300, Malaysia
Riza Andrian Ibrahim: Doctoral Program, Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Jatinangor 45363, Indonesia
Moch Panji Agung Saputra: Doctoral Program, Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Jatinangor 45363, Indonesia
Yuyun Hidayat: Department of Statistics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Bandung 45363, Indonesia
Igif Gimin Prihanto: Research Center for Testing Technology and Standards, National Research and Innovation Agency, Jakarta Pusat 10340, Indonesia

Mathematics, 2022, vol. 10, issue 15, 1-19

Abstract: The compound Poisson process (CPP) is often used in catastrophe risk modeling, for example, aggregate loss risk modeling. Hence, CPP can be involved in pricing catastrophe bonds (CAT bonds) because it requires a catastrophe risk modeling method. However, studies of how the application of CPP in pricing CAT bonds is still scarce. Therefore, this study aims to conduct a systematic literature review (SLR) on how CPP is used in pricing CAT bonds. The SLR consists of three stages: the literature selection, bibliometric analysis, and gap analysis. At the literature selection stage, the 30 articles regarding the application of CPP in pricing CAT bonds are obtained. Then, the conceptual and nonconceptual structures of the articles are mapped at the bibliometric analysis stage. Finally, in the gap analysis stage, the application of CPP in pricing CAT bonds from the previous studies is analyzed, and new research opportunities are studied. This research can be a reference for researchers regarding the application of CPP in pricing CAT bonds and can motivate them to design more beneficial ways of pricing CAT bonds with CPP in the future.

Keywords: compound Poisson process; catastrophe bond; pricing; systematic literature review; bibliometric analysis; gap analysis (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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