arXiv q-fin· Saeid Safarveisi·· 6 hr agoAI Score37
Application of Geometric Riemann Pricing Algorithm in Incomplete Market Catastrophe Bond Valuation: Market-Consistent Financial Entropy and Frequency-Severity Risk Premium Decomposition
An Application of Geometric Riemannian Pricing Algorithm for Valuing Catastrophe Bonds in Incomplete Markets: Market-Consistent Financial Entropy and the Split of Frequency and Severity Risk Premia
AI summary
This study proposes an incomplete market catastrophe (CAT) bond pricing framework based on financial entropy Riemannian geometric optimization, transforming pricing measure selection into a maximum financial entropy problem on finite-dimensional manifolds of equivalent measures. It uses unhedgeable market prices of catastrophe frequency and severity risks as parameters, with fixed discounting under a risk-free term structure.
Source:arXiv q-fin · arxiv.org