QMC techniques for CAT bond pricing*

Albrecher Hansjörg, Hartinger Jürgen and Tichy Robert F.
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Albrecher Hansjörg: Graz University of Technology, Department of Mathematics, Steyrergasse 30, A-8010 Graz, Austria. E-mail: albrecher@tugraz.at
Hartinger Jürgen: Graz University of Technology, Department of Mathematics, Steyrergasse 30, A-8010 Graz, Austria. E-mail: hartinger@finanz.math.tugraz.at
Tichy Robert F.: Graz University of Technology, Department of Mathematics, Steyrergasse 30, A-8010 Graz, Austria. E-mail: tichy@weyl.math.tugraz.at

Monte Carlo Methods and Applications, 2004, vol. 10, issue 3-4, 197-211

Abstract: Pricing of catastrophe bonds leads to integrals with discontinuous and formally infinite-dimensional integrands. We investigate the suitability of Quasi-Monte Carlo methods for the numerical evaluation of these integrals and develop several variance-reduction algorithms. Furthermore, the performance of Quasi-Monte Carlo sequences for asymptotically efficient rare event simulation is examined. Various numerical illustrations are given.

Keywords: Quasi-Monte Carlo; insurance linked securities; rare events; importance sampling; variation reduction (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1515/mcma.2004.10.3-4.197

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