Earticle

초록

영어

This study develops a structural framework to value insurers' contingent capital with counterparty risk (CR) and overcomes the problem of price endogeneity (PE) in the valuation model. Our results on the focal contingent capital instrument - catastro- phe equity put option (CatEPut) - indicate that prices can easily be overestimated by 110 basis points without considering CR and be underestimated by 17{34 basis points without considering PE. This study also examines how CatEPuts aect the buyer's probability of default (PD). Our results show that buying CatEPut lowers the buyer's PD; however, if we ignore the new equity eect due to share issuance, the result is not true in some scenarios. Without taking CR and PE into account, one may signicantly overestimate the credit enhancement provided by the CatEPuts.

목차

Abstract
 1 Introduction
 2 Assumption
  2.1 Interest Rate
  2.2 Asset Value
  2.3 Liability and Catastrophe
  2.4 Insurer's Share Price
  2.5 Exercise Style
  2.6 Probability of Default
 3 Valuation Model
  3.1 Catastrophic Loss
  3.2 Payo of Contingent Capital
  3.3 Price of Contingent Capital
  3.4 Price Endogeneity
 4 Numerical Analysis
  4.1 Parameters
  4.2 CatEPut Price with Price Endogeneity
  4.3 CatEPut Price with Counterparty Risk
 5 Further Discussions
  5.1 CatEPut Transaction and Credit Rating
  5.2 Correlation of Catastrophe Risk
  5.3 Interest Rate Risk
 6 Summary Remarks
 Appendix
 References
 Table
 Figure

키워드

저자

• Jin-Ping Lee [ Department of Finance, Feng Chia University, Taichung, Taiwan. ]
• Chien-Ling Lo [ Department of Finance, National Taiwan University, ]
• Min-Teh Yu [ Professor of Finance, National Taiwan University and Research Fellow at NCCU-RIRC, Taipei 10673, Taiwan. ] Corresponding author

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간행물

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• 간행물명

  한국재무학회 학술대회

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• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330