Utility Indifference Pricing of Insurance Catastrophe Derivatives

Andreas Eichler, Gunther Leobacher, Michaela Szölgyenyi

Publication: Scientific journalJournal articlepeer-review

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.
Original languageEnglish
Pages (from-to)515 - 534
JournalEuropean Actuarial Journal
Volume7
DOIs
Publication statusPublished - 2017

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 101014 Numerical mathematics
  • 401117 Viticulture
  • 101024 Probability theory
  • 101007 Financial mathematics

Cite this