Application of the one-factor CIR interest rate model to catastrophe bond pricing under uncertainty

• Autorzy: Nowak P. , Romaniuk M.

Identyfikatory

DOI

10.14313/JAMRIS_4-2013/23

• Języki publikacji: EN

Abstrakty

EN

The number and amount of losses caused by natural catastrophes are important problems for insurance industry. New financial instruments were introduce to transfer risks from insurance to financial market. In this paper we consider the problem of pricing such instruments, called the catastrophe bonds (CAT bonds). We derive valuation formulas using stochastic analysis and fuzzy sets theory. As model of short interest rate we apply the one-factor Cox–Ingersoll–Ross (CIR) model. In this paper we treat the volatility of the interest rate as a fuzzy number to describe uncertainty of the market. We also apply the Monte Carlo approach to analyze the obtained cat bond fuzzy prices.

Słowa kluczowe

EN

asset pricing; catastrophe bonds; CIR model; stochastic analysis; Monte Carlo simulation; fuzzy numbers

• Wydawca: Łukasiewicz Industrial Research Institute for Automation and Measurements PIAP
• Czasopismo: Journal of Automation Mobile Robotics and Intelligent Systems
• Rocznik: 2014
• Tom: Vol. 8, No. 3
• Strony: 19--27
• Opis fizyczny: Bibliogr. 42 poz., rys.

Twórcy

autor

Nowak P.

• Systems Research Institute Polish Academy of Sciences, ul.Newelska 6, 01–447 Warszawa, Poland,

autor

Romaniuk M.

• Systems Research Institute Polish Academy of Sciences, The John Paul II Catholic University of Lublin, ul. Newelska 6, 01–447 Warszawa, Poland

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