Property-casualty (P&C) insurers are exposed to rare but severe natural disasters. This paper analyzes the relation between catastrophe risk and the implied volatility smile of insurance stock options. We find that the slope is significantly steeper compared to non-financials and other financial...

The growth of risk capital regulatory regimes and continuous convergence of re/insurance and capital markets instruments and investment processes creates demand for quantitative and systematic risk management strategies for portfolio and line-of-business volatility and correlation dispersion....