A canonical first passage time model to pricing nature-linked bonds

Victor Vaugirard ()
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Victor Vaugirard: TEAM-CNRS University of Paris at Sorbonne

Economics Bulletin, 2004, vol. 7, issue 2, 1-7

Abstract: This paper shows that pricing catastrophe bonds boils down to computing first-passage time distributions of jump-diffusion processes. It derives a generic valuation expression by assuming that the jump risk is not systematic and then performs simulations, which can stress the sensitivity of insurance bond values to changes in underlying parameters.

Keywords: Catastrophe; risk (search for similar items in EconPapers)
JEL-codes: C6 G1 (search for similar items in EconPapers)
Date: 2004-07-05
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Citations: View citations in EconPapers (7)

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