JOURNAL OF SHANDONG UNIVERSITY(NATURAL SCIENCE) ›› 2025, Vol. 60 ›› Issue (3): 12-21.doi: 10.6040/j.issn.1671-9352.0.2023.231

• Financial Mathematics • Previous Articles     Next Articles

Double-triggered catastrophe put option with risk ratio and its pricing

LI Shilong, LIU Xi   

  1. Insurance Institute, Shandong University of Finance and Economics, Jinan 250014, Shandong, China
  • Published:2025-03-10

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Abstract: In order to reflect both the impact of the accumulated catastrophe compensation loss of insurance companies on the exercise returns of catastrophe options and the risk tolerance level of insurance companies, the risk ratios based on VaR is added into the payment structure of ordinary double triggered catastrophe put options. Firstly, the pricing formula for catastrophe put options with risk ratios is derived in the product probability space of finance and catastrophe; Secondly, the POT model is utilized to fit the distribution of catastrophe loss based on the typhoon catastrophe data in China to display the thick tailed characteristics of catastrophic losses; Finally, the Monte Carlo simulation method is used to analyze the sensitivity of the factors affecting the catastrophe put option and the prices of the catastrophe put options with risk ratios are compared with those of ordinary catastrophe options.

Key words: risk ratio, double-triggered catastrophe put option, product probability space, peak over threshold model

CLC Number: 

  • O211.9
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