Article ID Journal Published Year Pages File Type
4637986 Journal of Computational and Applied Mathematics 2016 15 Pages PDF
Abstract

We consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modeled 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 and present numerical examples.

Related Topics
Physical Sciences and Engineering Mathematics Applied Mathematics
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