A Research On Returns Of Compensation Fund For Marine Hazards Based On Black-litterman Model

With the rising economy of the coastal area，the economic loss brought bymarine hazards especially Storm Surge Disaster is worsening. The methods toestablish a complete marine hazards prevention and mitigation system as well asstrengthen the ability to cope with emergencies have become an important issue ofimplementing the strategic plan of12th Five-Year Plan. Besides，they contributegreatly to promoting the development of China’s marine economy.As one of the effective financing methods，compensation fund plays a vital rolein coping with emergencies and has been used in many developed countries，forexample， the Caribbean Catastrophe Risk Fund. With the requirements ofcomprehensive disaster prevention，financial risk management counter measures areneeded urgently. However， China’s disaster management and financial marketdevelopment relatively lag. On one hand， the benefit-based relationships ofhazard-affected bodies are not very obvious，thus leading fairly invalid compensatorystrategies. On the other hand，incomplete pricing methods restrict the development ofcompensation-related products in China. The paper quotes the frame of DisasterEconomics Theory and analyzes the current situation of compensation fund fordisasters. After pointing out that such financial products are in the initial stage，thepaper describes the operations of compensation fund for marine hazards based on thedefinition of general fund and China’s incomplete information markets. By employingthe Disaster Economics Theory，this paper argues the public welfare and profitabilityof the compensation fund mentioned above. In the process of exploring the operationsof the compensation fund，the paper mainly introduces its financing mechanism andoperation mechanism. Under the guidance of the principle of testability，this paperclassifies the returns of the fund and points out that the estimation of the testablereturns affects pricing the compensation fund. After absorbing the experience of pricing method for general fund，the paper provides a theoretical method to measurethe returns of the compensation funds and puts the emphasis on the investors’opinions as well as the condition of incomplete information market.Based on the analysis of the compensation fund for marine hazards，the paperillustrates the necessary of the proper commercial operations of this fund. Afterconstructing a risk control model based on constraint satisfaction，this paper locatesthe potential investment targets. Then， with the guidance of the classicalmean-variance model，this paper applies the investors’ opinion to the Black-Littermanmodel and finds out the optimal portfolio，thus trying to offer a reasonable assessmentof the returns of such targets mentioned above.The innovation of this paper is mainly reflected in the construction model of therisk control mechanism and the method to measure the returns of compensation fundfor marine hazards. Before applying Black-Litterman model to measuring the returnsof compensation funds for marine hazards，this paper estimates the risk levels ofSea-related listed companies so as to limit the research sample. With the guidance ofMonte Carlo Simulation，this paper provides an innovative research perspective tostrengthen the applicability and efficiency of B-L model. In addition，the research onthe B-L returns of investment objects lays a solid foundation of the reasonably pricedcompensation fund，thus，it has some practical significance to promote the furtherdevelopment of China.