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| Victor Vaugirard |
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| ''A canonical first passage time model to pricing nature-linked bonds'' |
| ( 2004, Vol. 7 No.2 ) |
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| This paper shows that pricing catastrophe bonds boils down to computing first-passage time distributions of jump-diffusion processes. It derives a generic valuation expression by assuming that the jump risk is not systematic and then performs simulations, which can stress the sensitivity of insurance bond values to changes in underlying parameters. |
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| Keywords: Catastrophe risk |
JEL:
C6 - Mathematical Methods and Programming: General |
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| Manuscript Received : Jul 04 2004 | | Manuscript Accepted : Jul 05 2004 |
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