Catastrophe bond: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Added link to Treasurer's Handbook)
imported>Doug Williamson
(Added link to Treasurer's Handbook)
 
(No difference)

Latest revision as of 12:48, 12 November 2015

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