Ambiguity aversion and an intertemporal equilibrium model of catastrophe-linked securities pricing
نویسنده
چکیده
To explain several stylized facts concerning catastrophe-linked securities premium spread, we propose an intertemporal equilibrium model by allowing agents to act in a robust control framework against model misspecification with respect to rare events. We have presented closed-form pricing formulas in some special cases and tested the model using empirical data and simulation. © 2011 Elsevier B.V. All rights reserved.
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