Utility indifference pricing of derivatives written on industrial loss indices

DOI10.1016/J.CAM.2015.11.028zbMATH Open1331.91100arXiv1404.0879OpenAlexW1879220956MaRDI QIDQ5964595FDOQ5964595

Gunther Leobacher, Philip Ngare

Publication date: 29 February 2016

Published in: Journal of Computational and Applied Mathematics (Search for Journal in Brave)

Abstract: We consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modelled by a compound Poisson process and the insurer can adjust her portfolio by choosing the risk loading, which in turn determines the demand. We compute the price of a CAT(spread) option written on that index using utility indifference pricing.

Full work available at URL: https://arxiv.org/abs/1404.0879

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zbMATH Keywords

jump processrandom thinningutility indifference pricecatastrophe derivatives(re-)insurance

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Optimal stochastic control (93E20)

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Cited In (4)

• Indifference pricing of insurance-linked securities in a multi-period model
• CAT BOND PRICING UNDER A PRODUCT PROBABILITY MEASURE WITH POT RISK CHARACTERIZATION
• Approximation methods for piecewise deterministic Markov processes and their costs
• Utility indifference pricing of insurance catastrophe derivatives

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