Methodological Considerations in the Statistical Modeling of Catastrophe Bond Prices

Methodological Considerations in the Statistical Modeling of Catastrophe Bond Prices

The problem of specifying and fitting a statistical model of the pricing of property catastrophe risk is addressed from a methodological perspective. Notable 21st century published efforts to do this are reviewed. The problem is framed in a business context and various strategic and tactical issues...

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Veröffentlicht in:Risk management and insurance review 2019-03, Vol.22 (1), p.39-56
1. Verfasser: Major, John A.
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Sprache:eng
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Economic models
Reinsurance
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creator Major, John A.
description The problem of specifying and fitting a statistical model of the pricing of property catastrophe risk is addressed from a methodological perspective. Notable 21st century published efforts to do this are reviewed. The problem is framed in a business context and various strategic and tactical issues are investigated. A naïve application of ordinary least squares regression is seen to have undesirable consequences. Alternative approaches are offered, including weighted least squares with weights inversely proportional to capital requirements, and alternative functional forms. Recommendations are offered.
doi_str_mv 10.1111/rmir.12114
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subjects Economic models
Reinsurance
title Methodological Considerations in the Statistical Modeling of Catastrophe Bond Prices
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