Extremal Analysis of Flooding Risk and Its Catastrophe Bond Pricing

Catastrophic losses induced by natural disasters are receiving growing attention because of the severe increases in their magnitude and frequency. We first investigated extreme tail behavior flood-caused economic maximum point precipitation based on peaks-over-threshold method process (PP) model its dependence. found that both direct well-modeled PP approach with certain These findings were further utilized to design a layered compensation insurance scheme using estimated value-at-risk (VaR) conditional VaR (CVaR) among all stakeholders. To diversify higher level due precipitation, we designed coupon paying catastrophe bond triggered hierarchical level, mild assumption independence between risk financial risk. The pricing sensitivity was quantitatively analyzed terms flood disaster distortion market Wang’s transform. Our trigger carefully compound Poisson process, modeling frequency intensity disasters. Lastly, regulations practical suggestions provided regarding prevention warning.