Findings from Dongbei University of Finance and Economics in Economics Reported (Pricing hybrid-triggered catastrophe bonds based on copula-EVT model): Economics

Economics Daily Report

2022 JUL 11 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Investigators discuss new findings in agriculture. According to news reporting out of Dalian, People’s Republic of China, by NewsRx editors, research stated, “This paper presents a hybrid-triggered catastrophe bond (CAT bond) pricing model.”

The news editors obtained a quote from the research from Dongbei University of Finance and Economics: “We take earthquake CAT bonds as an example for model construction and numerical analysis. According to the characteristics of earthquake disasters, we choose direct economic loss and magnitude as trigger indicators. The marginal distributions of the two trigger indicators are depicted using extreme value theory, and the joint distribution is established by using a copula function. Furthermore, we derive a multi-year hybrid-triggered CAT bond pricing formula under stochastic interest rates. The numerical experiments show that the bond price is negatively correlated with maturity, market interest rate and dependence of trigger indicators, and positively correlated with trigger level and coupon rate.”

According to the news editors, the research concluded: “This study can be used as a reference for formulating reasonable CAT bond pricing strategies.”

For more information on this research see: Pricing hybrid-triggered catastrophe bonds based on copula-EVT model. Quantitative Finance and Economics, 2022,6(2):223-243. (Quantitative Finance and Economics - http://www.aimspress.com/journal/QFE). The publisher for Quantitative Finance and Economics is AIMS Press.

A free version of this journal article is available at https://doi.org/10.3934/QFE.2022010.

Our news journalists report that additional information may be obtained by contacting Longfei Wei, School of Finance, Dongbei University of Finance and Economics, Dalian 116025, People’s Republic of China. Additional authors for this research include Lu Liu, Jialong Hou.