Pricing perpetual American catastrophe put options: A penalty function approach

DOI10.1016/J.INSMATHECO.2008.04.002zbMath1163.91412OpenAlexW1985820303MaRDI QIDQ1017770

Tao Wang, X. Sheldon Lin

Publication date: 12 May 2009

Published in: Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.insmatheco.2008.04.002

zbMATH Keywords

ruin theorysurplus processcatastrophe equity put optioncompound Poisson lossesmixture of Erlang distributionsPCS index

Mathematics Subject Classification ID

Applications of stochastic analysis (to PDEs, etc.) (60H30) Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.) (60J70)

Related Items (11)

A closed-form pricing formula for catastrophe equity options ⋮ Estimating Gerber-Shiu functions from discretely observed Lévy driven surplus ⋮ First passage time for compound Poisson processes with diffusion: ruin theoretical and financial applications ⋮ Catastrophe equity put options under stochastic volatility and catastrophe-dependent jumps ⋮ Explicit formula for the valuation of catastrophe put option with exponential jump and default risk ⋮ Pricing catastrophe risk bonds: a mixed approximation method ⋮ Pricing and simulating catastrophe risk bonds in a Markov-dependent environment ⋮ Valuation of contingent convertible catastrophe bonds -- the case for equity conversion ⋮ Ambiguity aversion and an intertemporal equilibrium model of catastrophe-linked securities pricing ⋮ Parallel option pricing with Fourier space time-stepping method on graphics processing units ⋮ Catastrophic risks and the pricing of catastrophe equity put options

Cites Work

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• Valuation of structured risk management products
• On the discounted penalty at ruin in a jump-diffusion and the perpetual put option
• Exact and approximate properties of the distribution of surplus before and after ruin
• The moments of the time of ruin, the surplus before ruin, and the deficit at ruin
• On the valuation of constant barrier options under spectrally one-sided exponential Lévy models and Carr's approximation for American puts.
• Analysis of a defective renewal equation arising in ruin theory
• Catastrophe options with stochastic interest rates and compound Poisson losses
• Simplified bounds on the tails of compound distributions
• Randomization and the American Put
• Option pricing when underlying stock returns are discontinuous
• On the Time Value of Ruin

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