New developments in fuzzy sets, intuitionistic fuzzy sets, generalized nets and related topics. Volume II: applications * Fuzzy pricing of catastrophe bond with a stepwise payoff function

In this paper we discuss the problem of catastrophe bond pricing with a stepwise payoff function. An approach based on the martingale method is applied. In order to price the catastrophe bond we use fuzzy parameters and apply the Vasicek interest rate model. We assume replicability of interest rate changes by financial instruments existing in the market as well as independence between catastrophe occurrence and behaviour of financial market. Then the Monte Carlo simulations based on the obtained fuzzy pricing formula are carried out. The presented fuzzy sets approach may incorporate expertise knowledge to overcome lack of precise data in the discussed case.

Bibliography p. 182-184

[5], 169-184 pages ; 21 cm

Bibliografia s. 182-184

[5], 169-184 stron ; 21 cm