The diffusion of complex securities: the case of CAT bonds

José Afonso Faias*, José Guedes

*Autor correspondente para este trabalho

Resultado de pesquisarevisão de pares

7 Citações (Scopus)

Resumo

Complex securities generally do not diffuse smoothly but by fits and starts in response to sudden shifts in demand, occurring as investors learn about the intrinsic value of the securities from their noisy performance. We use CAT bonds, a capital market-based alternative to CAT risk reinsurance, to illustrate the diffusion of a complex security that competes against a legacy financial product offered by financial intermediaries. We find that the diffusion of the security is highly path-dependent with the capricious ups and downs of its actual performance plus the competitive response of CAT reinsurers jointly determining its ultimate success or failure.
Idioma originalEnglish
Páginas (de-até)46-57
Número de páginas12
RevistaInsurance: Mathematics and Economics
Volume90
DOIs
Estado da publicaçãoPublicado - jan. 2020

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