XploRe Help : BondZeroCouponHPP

Keywords - Function groups - @ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Library:	finance
See also:	BondCoupon BondOnlyCoupon BondZeroCoupon

Quantlet:		BondZeroCouponHPP
Description:		computes price of the zero-coupon CAT bond for the given claim amount distribution and the homogeneous Poisson process governing the flow of losses

Reference(s):

K. Burnecki, G. Kukla, D. Taylor (2005) "Pricing of catastrophe bonds ", in “Statistical Tools for Finance and Insurance”, eds. P. Cizek, W. Härdle, R. Weron, Springer.

Usage:	`y = BondZeroCouponHPP(Z,D,T,r,lambda,distr,params,Tmax,N)`
Input:
	`Z`	scalar, payment at maturity
	`D`	n1 x 1 vector, threshold level
	`T`	n2 x 1 vector, time to expiry
	`r`	scalar, continuously-compounded discount rate
	`lambda`	scalar, intensity of the Poisson process
	`distrib`	string, claim size distribution
	`params`	n x 1 vector, parameters of the claim size distribution, n=1 (exponential), n=2 (gamma, lognormal, Pareto, Weibull), n=3 (Burr, mixofexps)
	`Tmax`	scalar, time horizon
	`N`	scalar, number of trajectories
Output:
	`y`	m x 3 matrix, the first column are times to bond's expiration, the second threshold levels and the third corresponding prices of the bond

Example:

library("finance") Z=1 D=1e9|2e9 T= 1|2 r=log(1.025) lambda=1 distr="Burr" params=#(0.5,4*1e16,5) Tmax=max(T) N= 20 ; d1=BondZeroCouponHPP(Z,D,T,r,lambda,distr,params,Tmax,N) d1

Result:

Contents of d1
[1,]        1    1e+09  0.97561
[2,]        1    2e+09  0.97561
[3,]        2    1e+09  0.95181
[4,]        2    2e+09  0.95181

Author: G. Kukla, 20041123 license MD*Tech