MC – Cat Bonds (catastrophe bonds)
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
When insurance companies issue Cat bonds, who do they share their risks with?
When insurance companies issue Cat bonds, who do they share their risks with?
What does the seller of a forward contract agree to do?
Determine the value of a futures contract on the Standard and Poor’s Index given the current level of the index, the dividend yield, and the risk-free rate.
How does a derivative contract transaction between a hedger and a speculator influence the risk exposure of each party?
What formula represents the connection between spot and futures prices in financial futures?
What advantages do insurance companies possess in assuming risk?
What is the typical Net Present Value (NPV) nature of hedging transactions?
What challenges do insurance companies encounter?
Which characteristic of derivative contracts fails to diminish counterparty risk?
What does a forward contract involve in terms of agreeing on a product purchase?