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Valuation of a Catastrophe Insurance Futures Contract Using Compound Poisson Claim Assumptions

Valuation of a Catastrophe Insurance Futures Contract Using Compound Poisson Claim Assumptions ... random variable Z, we have E[Z l :hvY3] = E(ZIJ2], (17) ProoJ. Omitted. See [2, p. 308]. D We will also ...
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Description: In 1993, the Chicago Board of Trade introduced a futures contract on a financial index that reflects the insurance claims emerging from catastrophes in a portfolio of policies. This article presents a valuation formula for the contract, under the assumption that catastrophes emerge as a Poisson process over time and that the claims from each catastrophe emerge as a Compound Poisson process. The formula is developed by taking conditional expectations with respect to a history of information that includes knowledge about the time of the catastrophes.
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- Authors: Jacques F Carriere, Kevin Andrew Buhr
- Date: Jan 1995
- Competency: External Forces & Industry Knowledge>Actuarial methods in business operations
- Publication Name: Actuarial Research Clearing House
- Topics: Finance & Investments>Derivatives; Finance & Investments>Risk measurement - Finance & Investments

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