Lin, Wen-Chang; Lai, Yi-Hsun - In: Applied Financial Economics 22 (2012) 12, pp. 1017-1028
This study evaluates a government-sponsored Excess-Of-Loss (XOL) Catastrophe (CAT) reinsurance contract using the financial option approach with extreme risk. We show that the Generalized Pareto Distribution (GPD), a Peak-Over-Threshold (POT) model, can properly depict the extreme losses from...