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Utility Indifference Pricing of Insurance Catastrophe Derivatives

Andreas Eichler, Gunther Leobacher and Michaela Sz\"olgyenyi

Papers from arXiv.org

Abstract: We propose a model for an insurance loss index and the claims process of a single insurance company holding a fraction of the total number of contracts that captures both ordinary losses and losses due to catastrophes. In this model we price a catastrophe derivative by the method of utility indifference pricing. The associated stochastic optimization problem is treated by techniques for piecewise deterministic Markov processes. A numerical study illustrates our results.

New Economics Papers: this item is included in nep-ger, nep-ias and nep-upt
Date: 2016-07, Revised 2017-05
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