- Tytuł:
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Raport Badawczy = Research Report ; RB/59/2005
Two-factor utility approach to valuation of catastrophe bonds - Autorzy:
- Jakubowski, Andrzej
- Wydawca:
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Instytut Badań Systemowych. Polska Akademia Nauk
Systems Research Institute. Polish Academy of Sciences - Powiązania:
- Raport Badawczy = Research Report
- Opis:
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26 stron ; 21 cm
In the paper, a new approach to valuation of bonds under the default risk conditions, based on the concept of the investors' two-factor utility function is proposed. The first factor describes the expected average return from the risky investments, while the second - the worst case return. As a class of risky securities the so-called catastrophe bonds are considered. It is assumed that depending on the structure of the security contract, the investor who buys the bond issued by a local authority governing the risky region - will lose his interest payments and/or the principal value, if a catastrophic event occurs. For the purpose of the valuation procedure, the new notions of the security safety level, the safety index, as welI as a two-rule decision model are successively introduced. The subjective scale as a measure of the degree of individuals' risk aversion is proposed. The idea of objective and subjective risk components is investigated. The methodology proposed is ilIustrated by a computational example.
Bibliografia s. 22
26 pages ; 21 cm
Bibliography p. 22 - Dostawca treści:
- RCIN - Repozytorium Cyfrowe Instytutów Naukowych
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