Catastrophe Bonds

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Cat Bonds

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Author : Florian Steiger
language : en
Publisher: Independently Published
Release Date : 2020-11-30

Cat Bonds written by Florian Steiger and has been published by Independently Published this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-11-30 with categories.

Investors across the globe are struggling to generate returns in a world of sub-zero interest rates. Macroeconomic events have the potential to shock financial markets from equities to corporate or government bonds alike. The traditional methods of portfolio diversification are failing in a world characterized by unprecedented liquidity injections from central banks. Cat bonds offer a viable alternative: Their performance is linked to the occurrence of natural catastrophes, such as hurricanes or earthquakes, instead of corporate profits or stock market sentiment. Family offices and leading institutional investors are shifting billions of assets into these little-known instruments thus effectively becoming competitors to the traditional providers of reinsurance coverage. With steady returns of more than 7% per annum over the past twenty years, cat bonds have proven their resilience many times. This book takes the reader through the history of the asset class, outlines the basic structure and economics before demonstrating the benefit of adding a cat bond allocation to a traditional multi-asset portfolio.

The Challenges Of Catastrophe Risk Management Empirical Analyses In The Cat Bond Market

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Author : Tobias Götze
language : en
Publisher: Cuvillier Verlag
Release Date : 2021-03-22

The Challenges Of Catastrophe Risk Management Empirical Analyses In The Cat Bond Market written by Tobias Götze and has been published by Cuvillier Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-22 with Business & Economics categories.

Due to the increasing relevance of natural catastrophes as a significant global source of risk and the capacity constraints in primary insurance and reinsurance markets, CAT bonds have become an important instrument to manage catastrophe risks by transferring them to the capital market. In three empirical studies, this dissertation examines the challenges related to catastrophe risk management with CAT bonds. First, the factors that influence the substitution of traditional reinsurance by CAT bonds are identified. These factors consist of the insured risk layer and the extends of reinsurer default risk, basis risk, and asymmetric information. Second, the accessibility of the CAT bond market for (re)insurance companies is analyzed and the results exhibit the existence of barriers to market entry in the form of higher premiums being paid by less reputable and financially weaker CAT bond sponsors. The third empirical study shows that CAT bond sponsors are susceptible to moral hazard, but also that moral hazard can be successfully prevented by sufficient loss retention or by the use of non-indemnity CAT bonds. Altogether, this dissertation contributes to improving the understanding of the CAT bond market and the challenges of catastrophe risk management using CAT bonds.

Catastrophe Bonds Spreading Risk

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Author : United States. Congress. House. Committee on Financial Services. Subcommittee on Oversight and Investigations
language : en
Publisher:
Release Date : 2002

Catastrophe Bonds Spreading Risk written by United States. Congress. House. Committee on Financial Services. Subcommittee on Oversight and Investigations and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Catastrophe bonds categories.

Catastrophe Bonds And Systemic Risk

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Author : Denefa Bostandzic
language : en
Publisher:
Release Date : 2013

Catastrophe Bonds And Systemic Risk written by Denefa Bostandzic and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.

The Development Dimension Fostering Catastrophe Bond Markets In Asia And The Pacific

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Author : OECD
language : en
Publisher: OECD Publishing
Release Date : 2024-02-14

The Development Dimension Fostering Catastrophe Bond Markets In Asia And The Pacific written by OECD and has been published by OECD Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024-02-14 with categories.

This report explores each of these conditions along with policy suggestions for fostering them, and discusses the development of multi-country CAT bonds in Asia and the Pacific.

By Force Of Nature

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Author : Stephan Dieckmann
language : en
Publisher:
Release Date : 2010

By Force Of Nature written by Stephan Dieckmann and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.

This paper re-examines to which extent catastrophe bond prices can be explained via investor preferences. I show that cat bond spreads equal between two and three times expected losses after controlling for bond-specific characteristics. At the occurrence of Katrina, the model predicts a 15-20% increase in the cost of capital of reinsurance companies and plausible degrees of comovement among different perils. The driving force behind the model is a habit process, in that catastrophes are rare economic shocks that could bring investors closer to their subsistence level. Such preferences may also explain why catastrophe bonds offer higher yield spreads compared to equally-rated corporate bonds.

Catastrophe Bonds As Reinsurance

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Author : Rumbidzai M. Masamvu
language : en
Publisher:
Release Date : 2013

Catastrophe Bonds As Reinsurance written by Rumbidzai M. Masamvu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Disaster insurance categories.

Diversification Through Catastrophe Bonds

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Author : Marcos Fabricio Perez
language : en
Publisher:
Release Date : 2015

Diversification Through Catastrophe Bonds written by Marcos Fabricio Perez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.

Are Catastrophe bonds (CAT bonds) zero beta investments? Are they a valuable new source of diversification for investors? We study these questions by analyzing the dynamic relations of CAT bond returns and the returns of the stock, corporate bond and government bond markets. Our multivariate GARCH model results provide evidence that CAT bonds are zero beta assets only in non-crisis periods. We document that CAT bonds were not immune to the effects of the recent financial crisis. With the collapse of Lehman Brothers CAT bond returns became significantly correlated with the market. However the relatively small effect of the crisis on CAT bonds compared with other asset classes make them a valuable source of diversification for investors. Finally, the improved structures for new CAT bonds issued since 2009 seem to be positively received by the market, as CAT bond betas returned to pre-crisis levels.

Pricing Defaultable Catastrophe Bonds With Compound Doubly Stochastic Poisson Losses And Liquidity Risk

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Author : Yen-Chen (Jenny) Chen
language : en
Publisher:
Release Date : 2016

Pricing Defaultable Catastrophe Bonds With Compound Doubly Stochastic Poisson Losses And Liquidity Risk written by Yen-Chen (Jenny) Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.

Catastrophe bond (CAT bond) is one of the modern financial instruments to transfer the risk of natural disasters to capital markets. In this project, we provide a structure of payoffs for a zero-coupon CAT bond in which the premature default of the issuer is also considered. The defaultable CAT bond price is computed by Monte Carlo simulations under the Vasicek interest rate model with losses generated from a compound doubly stochastic Poisson process. In the underlying Poisson process, the intensity of occurrence is assumed to follow a geometric Brownian motion. Moreover, the issuer's daily total asset value is modelled by the approach proposed in Duan et al. (1995), and the liquidity process is incorporated to capture the additional return of investors. Finally, a sensitivity analysis is carried out to explore the effects of key parameters on the CAT bond price.

Climate Change Implications For The Catastrophe Bonds Market

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Author : Claudio Morana
language : en
Publisher:
Release Date : 2019

Climate Change Implications For The Catastrophe Bonds Market written by Claudio Morana and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.

Since their introduction in the mid-1990s, the return per unit of risk or multiple on catastrophe (cat) bonds has steadily declined. This paper investigates whether this pattern is consistent with the historical evolution of natural disaster risk. Assessing the accuracy of cat bond pricing is important, since about 50% of outstanding risk capital in the cat bonds market is currently exposed to Atlantic hurricanes -a risk that climate change, among other disruptions, is expected to enhance- and pension and mutual funds in European and other OECD countries currently own about 30% of the market. In this respect, while our findings suggest that falling multiples are primarily related to the Fed's expansionary monetary stance and to portfolio shift effects, we do also find evidence of significant undervaluation of natural disaster risk in the cat bonds market. This finding, also in light of the unfailing appetite of institutional investors for such securities, casts doubts over the sanity of the market and over cat bonds as suitable investment products for risk averse investors.