Catastrophe Bonds In A Distributed Applied Research In The Typhoon Risk In China

With the global wealth concentration degree increasing, the world-wide natural and man-made disasters constantly make the property loss increase dramatically. In this case, the insurance market itself is unable to cover a variety of catastrophe loss; besides reinsurance market capacity cannot effectively disperse super-large catastrophe risk. Meanwhile, the stock market developed rapidly. Asset securitization theory and innovation have made great success. Therefore based on the shortage of the supply in the insurance market and the reinsurance market, the capital market push forward an innovative financial product—catastrophe insurance risk securitization, which can disperse catastrophe risk. After nearly 10 years of development, the catastrophe insurance risk securitization theory has gradually been utilized in practice and been one of the forms of dispersing catastrophe risk.Pricing is the key problem of financial tools for catastrophe insurance risks securitization, whether price reasonably will affect the results of the evaluation of investors. Without convincing investors and scientific methods, there cannot be any high volume of products, which will make it not possible for the catastrophe insurance risk securitization development. Therefore based on the detailed introduction of catastrophe risk and catastrophe insurance risks securitization based on theoretical framework of securitization, this paper is focused on studying the catastrophe insurance risk securitization - the catastrophe bonds pricing. The pricing process is firstly based on the typhoon in China over the loss of distribution model; we obtained the suitable distribution form and accurate damage parameter estimation results. In addition, we have studied seven-days lending rates in the inter-bank and obtained good simulation results of short-term interest rates model—BK model, using this model suitable short-term interest rate volatility estimates have been obtained. Finally according to Loubergécatastrophe bonds theory and pricing method on the basis of term structure of interest rate in binary tree, we tried to price our hypothetical typhoon loss catastrophe bonds.Catastrophe insurance risk securitization will become the important way to scatter catastrophe risk; scientific pricing method is the core content of financial instruments. The research in this paper has provided the necessary reference for the catastrophe insurance risk securitization pricing.