Findings from Polish Academy of Sciences Provides New Data on Computational Mathematics (Valuing catastrophe bonds involving correlation and CIR…

Findings from Polish Academy of Sciences Provides New Data on Computational Mathematics (Valuing catastrophe bonds involving correlation and CIR interest rate model)

By a News Reporter-Staff News Editor at Journal of Mathematics -- Data detailed on Mathematics - Computational Mathematics have been presented. According to news reporting from Warsaw, Poland, by VerticalNews journalists, research stated, "Natural catastrophes lead to problems of insurance and reinsurance industry. Classic insurance mechanisms are often inadequate for dealing with consequences of catastrophic events."

The news correspondents obtained a quote from the research from the Polish Academy of Sciences, "Therefore, new financial instruments, including catastrophe bonds (cat bonds), were developed. In this paper we price the catastrophe bonds with a generalized payoff structure, assuming that the bondholder's payoff depends on an underlying asset driven by a stochastic jump-diffusion process. Simultaneously, the risk-free spot interest rate has also a stochastic form and is described by the multi-factor Cox-Ingersoll-Ross model. We assume the possibility of correlation between the Brownian part of the underlying asset and the components of the interest rate model. Using stochastic methods, we prove the valuation formula, which can be applied to the cat bonds with various payoff functions."

According to the news reporters, the research concluded: "We use adaptive Monte Carlo simulations to analyze the numerical properties of the obtained pricing formula for various settings, including some similar to the practical cases."

For more information on this research see: Valuing catastrophe bonds involving correlation and CIR interest rate model. Computational & Applied Mathematics, 2018;37(1):365-394. Computational & Applied Mathematics can be contacted at: Springer Heidelberg, Tiergartenstrasse 17, D-69121 Heidelberg, Germany.

Our news journalists report that additional information may be obtained by contacting P. Nowak, Polish Academy Sci, Syst Res Inst, PL-01447 Warsaw, Poland.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1007/s40314-016-0348-2. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

Keywords for this news article include: Warsaw, Poland, Europe, Computational Mathematics, Mathematics, Polish Academy of Sciences.

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