Chang, Carolyn W.; Chang, Jack S.K.; Lu, WeLi - In: Journal of Banking & Finance 34 (2010) 1, pp. 24-32
We model claim arrival and loss uncertainties jointly in a doubly-binomial framework to price an Asian-style catastrophe (CAT) option with a non-traded underlying loss index using the no-arbitrage martingale pricing methodology. We span these uncertainties by benchmarking to the shadow price of...