Calibrating CAT bonds for Mexican earthquakes

The study of natural catastrophe models plays an important role in the prevention and mitigation of disasters. After the occurrence of a natural disaster, the reconstruction can be financed with catastrophe bonds (CAT bonds) or reinsurance. This paper examines the calibration of a real parametric CAT bond for earthquakes that was sponsored by the Mexican government. The calibration of the CAT bond is based on the estimation of the intensity rate that describes the earthquake process from the two sides of the contract, the reinsurance and the capital markets, and from the historical data. The results demonstrate that, under specific conditions, the financial strategy of the government, a mix of reinsurance and CAT bond, is optimal in the sense that it provides coverage of USD 450 million for a lower cost than the reinsurance itself. Since other variables can affect the value of the losses caused by earthquakes, e.g. magnitude, depth, city impact, etc., we also derive the price of a hypothetical modeled-index loss (zero) coupon CAT bond for earthquakes, which is based on the compound doubly stochastic Poisson pricing methodology from BARYSHNIKOV, MAYO and TAYLOR (2001) and BURNECKI and KUKLA (2003). In essence, this hybrid trigger combines modeled loss and index trigger types, trying to reduce basis risk borne by the sponsor while still preserving a nonindemnity trigger mechanism. Our results indicate that the (zero) coupon CAT bond price increases as the threshold level increases, but decreases as the expiration time increases. Due to the quality of the data, the results show that the expected loss is considerably more important for the valuation of the CAT bond than the entire distribution of losses. The study of natural catastrophe models plays an important role in the prevention and mitigation of disasters. After the occurrence of a natural disaster, the reconstruction can be financed with catastrophe bonds (CAT bonds) or reinsurance. This paper examines the calibration of a real parametric CAT bond for earthquakes that was sponsored by the Mexican government. The calibration of the CAT bond is based on the estimation of the intensity rate that describes the earthquake process from the two sides of the contract, the reinsurance and the capital markets, and from the historical data. The results demonstrate that, under specific conditions, the financial strategy of the government, a mix of reinsurance and CAT bond, is optimal in the sense that it provides coverage of USD 450 million for a lower cost than the reinsurance itself. Since other variables can affect the value of the losses caused by earthquakes, e.g. magnitude, depth, city impact, etc., we also derive the price of a hypothetical modeled-index loss (zero) coupon CAT bond for earthquakes, which is based on the compound doubly stochastic Poisson pricing methodology from BARYSHNIKOV, MAYO and TAYLOR (2001) and BURNECKI and KUKLA (2003). In essence, this hybrid trigger combines modeled loss and index trigger types, trying to reduce basis risk borne by the sponsor while still preserving a nonindemnity trigger mechanism. Our results indicate that the (zero) coupon CAT bond price increases as the threshold level increases, but decreases as the expiration time increases. Due to the quality of the data, the results show that the expected loss is considerably more important for the valuation of the CAT bond than the entire distribution of losses.CAT bonds, Reinsurance, Earthquakes, Doubly Stochastic Poisson Process, Trigger mechanism, Risk and Uncertainty,

Maria Lopez-Cabrera

Spotlight: Udoc-U Otters Portraits Created by CSUMB Undoc-U Otter students, Maria Lopez-Cabrera, Marisol Cruz, Daniella Lopez, Juan Pacheco Marcial, Jesus Loza-Mendez, Victoria Ordaz Garcia, Mirla Ramirez, and Adriana Ramirez Altamirano, these portraits are an interdisciplinary collaboration between the School of Humanities and Communication (HCOM) and the Visual and Public Art Dept. (VPA), and are part of a series of screenings, panels, and workshops made possible through funding from the National Endowment for the Humanities (NEH). Led by Dionicio Mendoza, Assistant Professor of Visual and Public Art, I AM WHO I AM…SO WHAT is a series of mixed-media workshops that aim to raise awareness about the urgent issues facing our undocumented community by emphasizing art as a tool for empowerment and community-building

Icnología: huellas bajo la lupa

Una de las líneas de investigación que desarrolla el LGA es la icnología (ichnos: trazas, huellas; logos: estudio), como su etimología lo indica es la ciencia que se ocupa del estudio de trazas recientes y fósiles hechas por organismos. Para ejemplificar una traza reciente tratemos de imaginar un ambiente de invierno de Ushuaia; la nieve recién caída nosotros caminando sobre ella y dejando huellas, trazas, que en este caso y como pasa generalmente con las huellas que dejan los vertebrados son fáciles de asociar con el productor. Las huellas en la nieve, no tienen potencial de preservación, pero si las huellas están realizadas en substratos como por ejemplo el limo o el barro empapado en agua, es muy probable que se preserven en el registro geológico constituyendo una traza fósil. La rastrillada de los dinosaurios es un ejemplo de traza fósil, en la Figura 1 la traza fósil Titanopodus mendozensis fue conservada en sedimentos que formaban una planicie deltaica. Una traza fósil es una estructura preservada en el sedimento, es de origen biológico y refleja el comportamiento del organismo que la produce. Tomando como ejemplo la Figura 1, la rastrillada (una estructura preservada) fue hecha por titanosaurios (organismos) cuando se desplazaban de un lugar a otro (comportamiento). Este comportamiento se encuadra dentro de las trazas de locomoción o movimiento.Fil: Lopez Cabrera O., Maria Isabel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Austral de Investigaciones Científicas; Argentin

Tamizaje Fitoquímico en las hojas frescas de laurelillo [Cordia inermis (Mill.) I. M. Johnst.]. Laboratorio de Control de Calidad de Medicamentos. UNAN-León. Agosto–Octubre 2010

La medicina alternativa se ha practicado desde los albores de la humanidad a través de tentativas y desaciertos, que comprenden la suma de todos los conocimientos y prácticas que pueden ser explicados o no, empleadas en la prevención, diagnóstico y eliminación de desbalances físicos, mentales o sociales, obtenidas exclusivamente sobre la experiencia práctica y observación transmitida de generación en generación, de forma oral o escrita. La Fitoquímica se encarga del estudio de los componentes orgánicos que son sintetizados y acumulados por las plantas, así como de sus estructuras químicas, su biosíntesis, metabolismo, distribución y función biológica. Con la realización del Tamizaje Fitoquímico puede conocerse que tipo de metabolitos están presentes. Esto permite hacer referencia sobre posibles efectos fisiológicos que pudieran manifestarse a largo plazo por el consumo de una planta, y como consecuencia, su utilidad potencial ya sea en la medicina o la industria farmacéutica. Tomando en cuenta que no existen estudios fitoquímicos precedentes en esta especie, pero si en las especies del género Cordia, se investigará la presencia de los metabolitos presentes en las hojas frescas de Cordia inermis