Modelling and pricing of catastrophe risk bonds with a temperature-based agricultural application

Karagiannis, N, Assa, H, Pantelous, AA ORCID: 0000-0001-5738-1471 and Turvey, CG (2016) Modelling and pricing of catastrophe risk bonds with a temperature-based agricultural application. QUANTITATIVE FINANCE, 16 (12). pp. 1949-1959.

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Official URL: http://dx.doi.org/10.1080/14697688.2016.1211791

Abstract

Catastrophe risk bonds are always within a multi-asset class portfolio of alternative risk premia in many hedge funds. In this paper, we consider an over-the-counter insurance contract on catastrophe risk between an insurance company and a hedge-fund. The contract acts as a bond within which the insurance company, which issues the bond, pays payments higher than the market risk-free interest, in order to be insured against the risk of a predefined natural catastrophe. The contract is priced by the utility indifference pricing method. We apply our framework to price agricultural catastrophe bonds in two cities in Iran where their harvests are exposed to the risk of low temperature.

Item Type:	Article
Uncontrolled Keywords:	Catastrophe risk bonds, Insurance, Hedge fund, Over the counter (OTC), Utility indifference pricing method, Agricultural catastrophes
Depositing User:	Symplectic Admin
Date Deposited:	29 Jun 2016 07:50
Last Modified:	19 Jan 2023 07:35
DOI:	10.1080/14697688.2016.1211791
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3001876