This paper demonstrates that catastrophe (cat) bonds provide substantial benefits of diversification when added to an … investor's opportunity set already consisting of securities from traditional asset classes. We find that cat bonds … estimate DCC-GARCH models and find a low average correlation between cat bonds and traditional asset classes. We then conduct …

€10billion insurer portfolio. Current market conditions favor short bond duration, reducing government bonds and mixing in … some high yield bonds. Duration matching now decreases return potential and increases risk so that Solvency 2 regulation is … to the mitigation of loss by a balance of opposing forces when bonds are reinvested. Their downside is resilient to …

to deal with defaultable bonds. For important examples, we provide characterizations of cash subadditivity and show that …

previous securitizations, we present our proposed longevity bonds, whose payoffs are structured as a series of put option … demonstrate that the risk cubic model developed for pricing catastrophe bonds can be applied to mortality and longevity bond … pricing and use the model to calculate risk premiums for longevity bonds …

In this paper, we present a new model that takes an arbitrage approach to the valuation of catastrophic risk bonds (CAT … bonds). The model considers the sponsor's exposure to currency exchange risk and the risk of catastrophic events. We use a …

portfolios. The efficient portfolios are dominated by short term and BBB rated bonds. The lack of diversification and over …-exposure to bonds with higher credit risk in different market regimes represents a weakness of the Solvency II regulation with …