3. Catastrophe bonds (S27-2) On some catastrophe bonds, payments are reduced if the claims against the issuer
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3. Catastrophe bonds (S27-2) On some catastrophe bonds, payments are reduced if the claims against the issuer exceed a specified sum. In other cases, payments are reduced only if claims against the entire industry exceed some sum. What are the advantages and disadvantages of the two structures? Which involves more basis risk? Which may create a problem of moral hazard?
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Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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