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Pricing perpetual American CatEPut options when stock prices are correlated with catastrophe losses
- Authors
- Kim, Hwa-Sung; Kim, Bara; Kim, Jerim
- Issue Date
- 8월-2014
- Publisher
- ELSEVIER SCIENCE BV
- Keywords
- Catastrophe equity put option; Bivariate exponential distribution; Option pricing
- Citation
- ECONOMIC MODELLING, v.41, pp.15 - 22
- Indexed
- SSCI
SCOPUS
- Journal Title
- ECONOMIC MODELLING
- Volume
- 41
- Start Page
- 15
- End Page
- 22
- ISSN
- 0264-9993
- Abstract
- A catastrophe equity put (CatEPut) option is a catastrophe derivative that allows insurance companies to raise equity capital when they face catastrophe losses. This study focuses on a pricing model for a CatEPut options. First, unlike previous research, this study provides a CatEPut option pricing model in which stock prices and catastrophe losses are moderately correlated. Second, this study examines the practical characteristics of American CatEPut options. Third, through a numerical analysis, we observe that it is necessary to consider the effects of a Moderate correlation between stock prices and catastrophe losses on the prices of perpetual American CatEPut options. (C) 2014 Elsevier B.V. All rights reserved.
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Collections - College of Science > Department of Mathematics > 1. Journal Articles
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