Design of hybrid catastrophe bonds based on the public-private partnership model

Abstract

From the perspective of insufficient supply and demand of catastrophe bonds, combining the occurrence of natural catastrophes with the performance of the capital market, a hybrid catastrophe bond based on the public-private cooperation model is designed innovatively. Firstly, the paper deconstructs the operating framework of the public-private cooperative model of catastrophe bonds, and shows that it can improve the supply of catastrophe bonds to a greater extent. Secondly, it proves that the bond combined with the stock market state and the catastrophe state can increase investors' holding demand. Finally, the future income cash flow including principal, interest, and option is designed, and a hybrid catastrophe bond based on the public-private partnership model is obtained. The validity of bond issuance is proved from the perspective of investors' psychological expectations, and it is proved that the hybrid catastrophe bond design based on the public-private partnership can alleviate the difficulty that catastrophe bond meets cold in both supply and demand.