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Index-linked catastrophe instrument valuation
This thesis proposes four contributions to the literature on index-linked catastrophe instrument valuation. Invariably, any exercise to find index-linked catastrophe instrument prices involves three key steps: construct a suitable arbitrage-free valuation model, estimate the parameters for the under...
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| Format: | Thesis |
| Language: | English |
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Division of Actuarial Science
2019
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| _version_ | 1867613209033179136 |
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| access_status_str | Open Access |
| author | Giuricich, Mario Nicolo |
| author2 | Burnecki, Krzysztof |
| author_browse | Burnecki, Krzysztof Giuricich, Mario Nicolo |
| author_facet | Burnecki, Krzysztof Giuricich, Mario Nicolo |
| author_sort | Giuricich, Mario Nicolo |
| collection | Thesis |
| description | This thesis proposes four contributions to the literature on index-linked catastrophe instrument valuation. Invariably, any exercise to find index-linked catastrophe instrument prices involves three key steps: construct a suitable arbitrage-free valuation model, estimate the parameters for the underlying loss process and simulate the instrument prices. Chapters 3 to 5 of this thesis loosely follow this process. In Chapter 3 we propose an index-linked catastrophe bond pricing model, which pervades in subsequent chapters. We furthermore show how, under certain assumptions, our model can use real-world catastrophe loss-data to find arbitrage-free, index-linked catastrophe bond prices. Chapter 4 demonstrates how we estimate parameters for the catastrophe-related insuranceloss process on which our pricing model relies. In practice, data from such insurance-loss processes is both left-truncated and heavy tailed. We build on ? ]’s procedure for modelling left-truncated data via a compound non-homogeneous Poisson process, and modify their fitting process so that it becomes systematically applicable in the context of heavy-tailed data. We close this chapter by presenting an importance sampling technique for simulating index-linked catastrophe bond prices. Chapter 5 treats the new problem of finding simple, closed-form expressions for indexlinked catastrophe bond prices. By using the weak convergence of compound renewal processes to α-stable Levy motion, we derive weak approximations to these catastrophe bond prices. ´ Their applicability is then highlighted in the context of our catastrophe-bond pricing model. Chapter 6 deviates from the ambit of catastrophe bond pricing, and considers a new type of insurance-linked security, namely the contingent convertible catastrophe bond. Our foremost contribution is that we comprehensively formalise the design and features of this instrument. Subsequently, we derive analytical valuation formulae for index-linked contingent-convertible catastrophe bonds. Using selected parameter values in line with earlier research, we empirically analyse our valuation formulae for index-linked contingent-convertible catastrophe bonds. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/29642 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:32:29.432Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2019 |
| publishDateRange | 2019 |
| publishDateSort | 2019 |
| publisher | Division of Actuarial Science |
| publisherStr | Division of Actuarial Science |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/29642 Index-linked catastrophe instrument valuation Giuricich, Mario Nicolo Burnecki, Krzysztof Ouwehand, Peter Platen, Eckhard Quantitative Finance This thesis proposes four contributions to the literature on index-linked catastrophe instrument valuation. Invariably, any exercise to find index-linked catastrophe instrument prices involves three key steps: construct a suitable arbitrage-free valuation model, estimate the parameters for the underlying loss process and simulate the instrument prices. Chapters 3 to 5 of this thesis loosely follow this process. In Chapter 3 we propose an index-linked catastrophe bond pricing model, which pervades in subsequent chapters. We furthermore show how, under certain assumptions, our model can use real-world catastrophe loss-data to find arbitrage-free, index-linked catastrophe bond prices. Chapter 4 demonstrates how we estimate parameters for the catastrophe-related insuranceloss process on which our pricing model relies. In practice, data from such insurance-loss processes is both left-truncated and heavy tailed. We build on ? ]’s procedure for modelling left-truncated data via a compound non-homogeneous Poisson process, and modify their fitting process so that it becomes systematically applicable in the context of heavy-tailed data. We close this chapter by presenting an importance sampling technique for simulating index-linked catastrophe bond prices. Chapter 5 treats the new problem of finding simple, closed-form expressions for indexlinked catastrophe bond prices. By using the weak convergence of compound renewal processes to α-stable Levy motion, we derive weak approximations to these catastrophe bond prices. ´ Their applicability is then highlighted in the context of our catastrophe-bond pricing model. Chapter 6 deviates from the ambit of catastrophe bond pricing, and considers a new type of insurance-linked security, namely the contingent convertible catastrophe bond. Our foremost contribution is that we comprehensively formalise the design and features of this instrument. Subsequently, we derive analytical valuation formulae for index-linked contingent-convertible catastrophe bonds. Using selected parameter values in line with earlier research, we empirically analyse our valuation formulae for index-linked contingent-convertible catastrophe bonds. 2019-02-18T11:36:54Z 2019-02-18T11:36:54Z 2018 2019-02-13T07:18:20Z Doctoral Thesis Doctoral PhD http://hdl.handle.net/11427/29642 eng application/pdf Division of Actuarial Science Faculty of Commerce University of Cape Town |
| spellingShingle | Quantitative Finance Giuricich, Mario Nicolo Index-linked catastrophe instrument valuation |
| thesis_degree_str | Doctoral |
| title | Index-linked catastrophe instrument valuation |
| title_full | Index-linked catastrophe instrument valuation |
| title_fullStr | Index-linked catastrophe instrument valuation |
| title_full_unstemmed | Index-linked catastrophe instrument valuation |
| title_short | Index-linked catastrophe instrument valuation |
| title_sort | index linked catastrophe instrument valuation |
| topic | Quantitative Finance |
| url | http://hdl.handle.net/11427/29642 |
| work_keys_str_mv | AT giuricichmarionicolo indexlinkedcatastropheinstrumentvaluation |