Pricing Zero-Coupon Catastrophe Bonds Using EVT with Doubly Stochastic Poisson Arrivals

Table 3

Parameters, definitions, and base values.

Parameters	Description	Values
Interest rate parameters
	Magnitude of mean-reverting force	0.1
	Volatility of interest rate	0.01, 0.03, 0.05
	Continuously compounded zero-coupon rate
Catastrophe loss parameters
	Shape parameter of the GPD of the amount of catastrophe losses for the insurer	0.9238
	Scale parameter of the GPD of the amount of catastrophe losses for the insurer
	Drift parameters of intensity function for catastrophic events
	Volatility of intensity function for catastrophic events
	Initial value of intensity function for catastrophic events	22.3512
Other parameters
	Time to expiry	2
	Trading time
	Face value of the CAT bond	1
	Threshold levels