Utility indifference pricing of derivatives written on industrial loss indexes

Gunther Leobacher and Philip Ngare

Papers from arXiv.org

Abstract: We consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modelled by a compound Poisson process and the insurer can adjust her portfolio by choosing the risk loading, which in turn determines the demand. We compute the price of a CAT(spread) option written on that index using utility indifference pricing.

Date: 2014-04
New Economics Papers: this item is included in nep-rmg and nep-upt
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