Cat bond and Catastrophe bond: Difference between pages
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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 == | ||
* [[ | * [[Bond]] | ||
* [[ILS]] | |||
[[Category:Debt_Capital_Markets]] | |||
[[Category:Business_and_Operational_Risk]] |
Revision as of 20:04, 17 August 2014
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.