The Pricing Of Catastrophe Compensation Fund

In recent years, earthquakes, tsunamis and other largely natural disasters occurred frequently. Catastrophe events cause unpredicted losses to the state and the public. The disaster of "5.12" Wen Chuan earthquake had caused approximately1trillion losses insurance only afford the compensation of1.66billion, and the short of losses was compensated basically by the government. In order to resolve the problem by market, pan xilong has presented the method of issuing Catastrophe Compensation Fund which can concentrate social forces, this paper is a part of the issue.Whether the catastrophe compensation fund can operate steadily, the most important factor is that the fund gets fair pricing. It means that the holder of catastrophe compensation fund registered in different place get the risk and expected income matched. To this end the paper firstly researched the pricing models of catastrophe bonds, catastrophe insurance and catastrophe options, and got the advantages and disadvantages of these models, and what we can learn from these models for the pricing of the catastrophe compensation fund. Secondly this paper researches the cash flow of fund in the condition of risk neutral, so this paper use the riskless rate as the discount rate of catastrophe compensation fund. To realize the pricing model, the paper use the Monte Carlo method to simulate the riskless rate in different time, and use these riskless rate paths as the discount rate, and get the pricing model of catastrophe compensation fund.Finally, the paper uses the earthquake data of Sichuan to get the empirical research of the pricing model. And get that if we use the earthquake data as the catastrophe data of Sichuan, the compensation times of the catastrophe compensation fund registered in Sichuan is19.2.