Utility Indifference Pricing of Insurance Catastrophe Derivatives
Pricing of Securities
2018-05-17 v2 Optimization and Control
Probability
Mathematical Finance
Abstract
We propose a model for an insurance loss index and the claims process of a single insurance company holding a fraction of the total number of contracts that captures both ordinary losses and losses due to catastrophes. In this model we price a catastrophe derivative by the method of utility indifference pricing. The associated stochastic optimization problem is treated by techniques for piecewise deterministic Markov processes. A numerical study illustrates our results.
Keywords
Cite
@article{arxiv.1607.01110,
title = {Utility Indifference Pricing of Insurance Catastrophe Derivatives},
author = {Andreas Eichler and Gunther Leobacher and Michaela Szölgyenyi},
journal= {arXiv preprint arXiv:1607.01110},
year = {2018}
}