Metadata language
A decision support procedure for pricing catastrophe bonds
Subtitle:Raport Badawczy = Research Report ; RB/56/2002
Creator: Publisher:
Instytut Badań Systemowych. Polska Akademia Nauk ; Systems Research Institute. Polish Academy of Sciences
Place of publishing: Date issued/created: Description:20, [2] pages ; 21 cm ; Bibliography p. 19-20
Subject and Keywords:Pricing ; Investment analysis ; Analiza inwestycji ; Obligacje katastroficzne ; Wycena ; Catastrophe bonds
Abstract:A new approach to valuation of bonds under the default risk conditions, based on the concept of the investors' two-factor utility function is proposed. The first factor describes the expected average return from the risky investments, while the second – the worst case return. As a class of risky securities the so-called catastrophe bonds are considered. It is assumed that depending on the structure of the security contract, the invesor who buys the bond issued by a local authority governing the risky region – will lose his interest payments and/or the principal value, if a catastrophic event occurs. For the purpose of the valuation procedure, the new notions of the security safety level, the safety index, as well as two-rule decision model are successively introduced. The subjective scale as a measure of the degree of individuals' risk aversion is proposed. The idea of objective and subjective risk components is investigated. The methodology proposed is illustrated by a computational example.
Relation:Raport Badawczy = Research Report
Resource type: Detailed Resource Type: Source: Language: Language of abstract: Rights:Creative Commons Attribution BY 4.0 license
Terms of use:Copyright-protected material. [CC BY 4.0] May be used within the scope specified in Creative Commons Attribution BY 4.0 license, full text available at: ; -
Digitizing institution:Systems Research Institute of the Polish Academy of Sciences
Original in:Library of Systems Research Institute PAS
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