Frequency and Severity Modelling Using Multifractal Processes: An Application to Tornado Occurrence in the USA and CAT Bonds
(2013) Environmental Modeling & Assessment — Vol. 19, n° 3, p. 207-220 (2013)
Files
document.pdf
Open Access - Adobe PDF
- 1.11 MB
Details
- Authors
- Abstract
- This paper proposes a statistical model for insurance claims arising from climatic events, such as tornadoes in the USA, that exhibit a large variability both in frequency and intensity. To represent this variability and seasonality, the claims process modelled by a Poisson process of intensity equal to the product of a periodic function, and a multifractal process is proposed. The size of claims is modelled in a similar way, with gamma random variables. This method is shown to enable simulation of the peak times of damage. A two-dimensional multifractal model is also investigated. The work concludes with an analysis of the impact of the model on the yield of weather bonds linked to damage caused by tornadoes.
- Affiliations
Rennes School of Business Finance
Citations
Hainaut, D., & Boucher, J.-P. (2013). Frequency and Severity Modelling Using Multifractal Processes: An Application to Tornado Occurrence in the USA and CAT Bonds. Environmental Modeling & Assessment, 19(3), 207-220. https://doi.org/10.1007/s10666-013-9388-9 (Original work published 2013)