Rational and mechanics of a peak risk variance swap for a property insurance portfolio

Ivelin Zvezdov

MPRA Paper from University Library of Munich, Germany

Abstract: In this technical report we explore the motivation, structuring and detailed mechanics of a variance swap contract adapted for a property insurance portfolio. We structure, price and test sensitivities of the swap contract using real event historical and modeled natural catastrophe loss data. Our key motivation is to propose an element of financial engineering innovation to insurance portfolio risk management to allow for constructing hedging strategies that may not be possible to achieve with traditional reinsurance treaties and contracts.

Keywords: variance swap; peak catastrophe risk hedging; insurance portfolio risk management and risk transfer (search for similar items in EconPapers)
JEL-codes: G22 G24 (search for similar items in EconPapers)
Date: 2012-04-07
New Economics Papers: this item is included in nep-ias and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38954

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