Portfolio optimization in the catastrophe space
构建了一个两主体序贯优化框架，模拟再保险/保险市场的经济学，研究再保险公司和保险公司如何在两个市场交界处最优配置有违约风险的巨灾再保险和无违约风险的巨灾债券。
Abstract In today's global catastrophe space, the role of insurance‐linked securities has evolved from that of a threatened reinsurance substitute to now being a viable complementary reinsurance product, underpinning the convergence of the two markets. This study constructs a two‐agent sequential optimization framework to mimic the economics of the reinsurance/insurance markets and shows how NPV‐maximizing reinsurers and hedging cost‐minimizing insurers can optimally allocate default‐risky catastrophe reinsurance and default‐free catastrophe bonds at the interface of these two markets. We analyze parametric impacts considering interest rate risk, financial leverage, basis risk, differential markup, catastrophe arrival intensity, and severity, as well as other relevant characteristics.