Abstract
AbstractIn today's global catastrophe space, the role of insurance‐linked securities has evolved from that of a threatened reinsurance substitute to now being a viable complementary reinsurance product, underpinning the convergence of the two markets. This study constructs a two‐agent sequential optimization framework to mimic the economics of the reinsurance/insurance markets and shows how NPV‐maximizing reinsurers and hedging cost‐minimizing insurers can optimally allocate default‐risky catastrophe reinsurance and default‐free catastrophe bonds at the interface of these two markets. We analyze parametric impacts considering interest rate risk, financial leverage, basis risk, differential markup, catastrophe arrival intensity, and severity, as well as other relevant characteristics.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
