원문정보
초록
영어
This study develops a structural framework to value insurers' contingent capital with counterparty risk (CR) and overcomes the problem of price endogeneity (PE) in the valuation model. Our results on the focal contingent capital instrument - catastro- phe equity put option (CatEPut) - indicate that prices can easily be overestimated by 110 basis points without considering CR and be underestimated by 17{34 basis points without considering PE. This study also examines how CatEPuts a ect the buyer's probability of default (PD). Our results show that buying CatEPut lowers the buyer's PD; however, if we ignore the new equity e ect due to share issuance, the result is not true in some scenarios. Without taking CR and PE into account, one may signi cantly overestimate the credit enhancement provided by the CatEPuts.
목차
1 Introduction
2 Assumption
2.1 Interest Rate
2.2 Asset Value
2.3 Liability and Catastrophe
2.4 Insurer's Share Price
2.5 Exercise Style
2.6 Probability of Default
3 Valuation Model
3.1 Catastrophic Loss
3.2 Payo of Contingent Capital
3.3 Price of Contingent Capital
3.4 Price Endogeneity
4 Numerical Analysis
4.1 Parameters
4.2 CatEPut Price with Price Endogeneity
4.3 CatEPut Price with Counterparty Risk
5 Further Discussions
5.1 CatEPut Transaction and Credit Rating
5.2 Correlation of Catastrophe Risk
5.3 Interest Rate Risk
6 Summary Remarks
Appendix
References
Table
Figure