and foreign interest rates, and a hedging cost for the currency risk to derive a semi-closed-form formula for the CAT bond … showing the following: in addition to catastrophic risk, the CAT bond price is affected mainly by the volatility of the …In this paper, we present a new model that takes an arbitrage approach to the valuation of catastrophic risk bonds (CAT …

Building on recent work incorporating recovery risk into structural models we consider the Black-Cox model with an … added recovery risk driver. The recovery risk driver arises naturally in the context of imperfect information implicit in …, whereby the asset risk driver A_t defines the default trigger and the recovery risk driver R_t defines the …

. Seemingly, markets have been demanding more stocks instead of bonds. Yet, instead of observing higher bond rates, paradoxically …, bond rates have been persistently negative after the Lehman-Brothers collapse. To explain this paradox, we suggest that, in …, this rise in perceived market fragility alone can explain the drop in both bond rates and price-dividend ratios observed …