Catastrophe Option Pricing And Empircal Analysis

In recent years,all kinds of natural disasters have occurred frequently in China,which have a serious impact on China’s economic development and caused great losses to people’s lives.In order to reduce the losses caused by catastrophe and enhance the catastrophe risk management ability,some countries and regions have introduced catastrophe derivatives into the derivatives market,and used the capital market to disperse the catastrophe insurance risks,thus transferring the huge economic losses caused by catastrophe.In this paper,catastrophe option is taken as the research object,and the catastrophe option pricing model is constructed by using martingale pricing method under jump diffusion process and stochastic interest rate model.Firstly,according to the characteristics of catastrophe option,catastrophe option is regarded as an upper-limit option with extension period and loss period subject to different steady increment processes and double upper limits.In order to better reflect the jumping characteristics of catastrophe option,jump-diffusion process is introduced into catastrophe option pricing process,and catastrophe option pricing model under jump-diffusion process is established.Catastrophe option price is obtained by combining PCS catastrophe loss index.Numerical simulation results show that catastrophe option pricing model under jump-diffusion process is effective.Secondly,in order to explore the impact of random interest rate on catastrophe option price,a catastrophe option pricing model under random interest rate is established by combining the stochastic interest rate model with catastrophe option pricing model.The impact of random interest rate on catastrophe option pricing is analyzed empirically,and the results show that the catastrophe option pricing model under random interest rate is ideal.Finally,considering the impact of factors other than jump diffusion process and random interest rate on catastrophe option price,the measures to improve catastrophe option pricing model are eliminated.