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Indexed by:会议论文

Date of Publication:2018-01-01

Included Journals:CPCI-SSH

Page Number:97-102

Key Words:catastrophe loss; risk diversification; POT model; bond tranches

Abstract:This paper provides a method to assess and allocate the earthquake catastrophe risk, and designs bond tranches while making a study on the valuation of CAT (catastrophe) bonds. We use POT model to simulate the distribution of direct economic loss caused by earthquakes. Based on the result of earthquake risk losses, we study on the risk allocation of different participants by taking confidence level as their risk tolerance index, including insurance market, reinsurance market, capital market and government finance. In catastrophe diversification mechanism, we focus on the CAT bonds. In order to satisfy investors of different risk preferences, we design and price three levels of bond tranches to fit bond holders' investing demands. Bond tranches make the CAT bonds more adaptable to different levels of risk preferences in the capital market and enhance the feasibility of the bond issue.