North American Actuarial Journal ( IF 1.4 ) Pub Date : 2020-12-26 , DOI: 10.1080/10920277.2020.1824798 Carolyn W. Chang, Jack S. K. Chang, Min-Teh Yu
Hurricane bonds are unique in that they are structured with a dual exercise condition: a physically based condition that the underlying hurricane makes landfall at a prespecified location, and a standard moneyness condition that they end in the money. As the time of landfall is uncertain, their maturities are also uniquely random. This research thus proposes a modeling methodology to solve this option-pricing problem—that is, to price hurricane bonds at the nexus of atmospheric science and finance by integrating hurricane risk modeling and option pricing modeling. We resolve this dual exercise/random maturity issue by implementing a coupled hurricane generator to simulate hurricane synthetic tracks, intensity, radius, two-dimensional wind fields, and hurricane-index value evolution along the tracks. We price the increasingly popular parametric and parametric-index hurricane bonds by Monte Carlo simulations, as the underlying hurricane indices are untraded and thus replication pricing is not viable.
中文翻译:
使用基于实物的期权定价方法为飓风债券定价
飓风债券的独特之处在于它们具有双重行使条件:潜在飓风在预先指定的位置登陆的基于物理的条件,以及它们以货币结束的标准货币条件。由于登陆时间不确定,它们的成熟度也具有独特的随机性。因此,本研究提出了一种建模方法来解决这个期权定价问题——即通过整合飓风风险模型和期权定价模型,在大气科学和金融的纽带上为飓风债券定价。我们通过实施耦合飓风发生器来模拟飓风合成轨迹、强度、半径、二维风场和沿轨迹的飓风指数值演变,解决了这种双重演习/随机成熟度问题。