Question
Assume the risk-free rate is 1.25%. The risk premiums of a CAT bond are given by the Cobb-Douglas function: RP = A (Probability)^ (Severity)^ Assuming
Assume the risk-free rate is 1.25%. The risk premiums of a CAT bond are given by the Cobb-Douglas function:
RP = A (Probability)^ (Severity)^
Assuming Probability = 0.01 and Severity = 0.67, construct two tables.
By varying from 0.15 to 0.95 in steps of 0.1
By varying from 0.15 to 0.95 in steps of 0.1
Comment on what trends you observe.
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The Selected Works Of George J. Benston Banking And Financial Services Volume 1
Authors: James D. Rosenfeld
1st Edition
0195389018, 0199745471, 9780199745470
