Cat bond and Catastrophe bond: Difference between pages

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Catastrophe bond.
A high-yield bond whose full payout is dependent on a given natural disaster <u>not</u> happening.  


This has the effect of providing insurance-like financial protection to the bond <u>issuer</u>. 
If the particular catastrophe happens, the issuer pays less - or in the extreme case nothing at all - on the bond.
The investor enjoys a higher yield, in exchange for accepting the catastrophe risk effectively transferred from the issuer.
Also known as a Cat bond.


== See also ==
== See also ==
* [[Catastrophe bond]]
* [[Bond]]
* [[ILS]]


[[Category:Long_term_funding]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]

Revision as of 14:16, 23 October 2012

A high-yield bond whose full payout is dependent on a given natural disaster not happening.

This has the effect of providing insurance-like financial protection to the bond issuer. If the particular catastrophe happens, the issuer pays less - or in the extreme case nothing at all - on the bond.

The investor enjoys a higher yield, in exchange for accepting the catastrophe risk effectively transferred from the issuer.

Also known as a Cat bond.

See also