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

 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
(C) MD*TECH Method and Data Technologies, 05.02.2006