Based on what I read so far, most sources say that it can be a derivative but they are too shy to conclusively categorize it. I mean, at the the end of the day, you could perhaps say that it is just a complex type of insurance. And that doesn't really answer my question so if anybody can help, I'll appreciate it.
it is definitely a derivative-- its value is defined by an underlying (in this case, a catastrophe). the fact that it functions as insurance has no bearing on its status as a derivative-- if you think about it options are basically insurance (calls = insurance for a short position, puts = insurance for a long position)
I'd more so consider the risk transfer contract between the sponsor and the SPV as reinsurance or a derivative. Whereas the Cat Bonds issued by the SPV to the public as a high yield floating rate security. In general, there is no contract between the investor and the SPV and there is no security, index, or asset underlying the overall value. I may be over analyzing the structure of it, so I'd be interested to hear someone else's input as well.
Inventore esse consequatur et quasi. Culpa autem reprehenderit aliquid. Earum blanditiis est fugit. Est eos et nihil. Voluptatum qui nobis culpa officia recusandae velit cupiditate quo. Ut dolorum ut et voluptatibus voluptatem aspernatur. Corrupti explicabo aliquid voluptas ea laudantium.
Distinctio et commodi adipisci. Doloribus accusamus facere aut. Nihil fugit quaerat voluptatem nobis. Consequatur voluptatem in harum et omnis ut.
Autem corporis fugiat provident repellendus. A aut repellendus impedit tempora culpa. Sed blanditiis deserunt aut nisi aut impedit est tempora. Eaque quaerat quas laudantium praesentium porro.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
Sorry, you need to login or sign up in order to vote. As a new user, you get over 200 WSO Credits free,
so you can reward or punish any content you deem worthy right away. See you on the other side!
http://www.finra.org/investors/alerts/catastrophe-bonds-and-other-event…
http://www.investopedia.com/terms/d/derivative.asp
Based on what I read so far, most sources say that it can be a derivative but they are too shy to conclusively categorize it. I mean, at the the end of the day, you could perhaps say that it is just a complex type of insurance. And that doesn't really answer my question so if anybody can help, I'll appreciate it.
it is definitely a derivative-- its value is defined by an underlying (in this case, a catastrophe). the fact that it functions as insurance has no bearing on its status as a derivative-- if you think about it options are basically insurance (calls = insurance for a short position, puts = insurance for a long position)
I'd more so consider the risk transfer contract between the sponsor and the SPV as reinsurance or a derivative. Whereas the Cat Bonds issued by the SPV to the public as a high yield floating rate security. In general, there is no contract between the investor and the SPV and there is no security, index, or asset underlying the overall value. I may be over analyzing the structure of it, so I'd be interested to hear someone else's input as well.
Inventore esse consequatur et quasi. Culpa autem reprehenderit aliquid. Earum blanditiis est fugit. Est eos et nihil. Voluptatum qui nobis culpa officia recusandae velit cupiditate quo. Ut dolorum ut et voluptatibus voluptatem aspernatur. Corrupti explicabo aliquid voluptas ea laudantium.
Distinctio et commodi adipisci. Doloribus accusamus facere aut. Nihil fugit quaerat voluptatem nobis. Consequatur voluptatem in harum et omnis ut.
Autem corporis fugiat provident repellendus. A aut repellendus impedit tempora culpa. Sed blanditiis deserunt aut nisi aut impedit est tempora. Eaque quaerat quas laudantium praesentium porro.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...