An Alternative Validation for Modeling Loss-Index Triggered Cat Bonds. A Case Study of Floods in Spain
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Following the continuous modelling of loss index triggers for CAT Bonds developed by Pérez-Fructuoso (2008 and 2009), this paper estimates the instantaneous loss reporting rate (the proposed model’s fundamental parameter) by applying a Restricted Minimum Squares’ alternative methodology to a dataset of several floods occurred in Spain. Results are compared with those stemming from the traditional methodology of maximum-likelihood, the Wiener-Process-induced model’s volatility is obtained, and the goodness-of-fit is verified through the calculation of the corresponding confidence intervals.
Instantaneous claim reporting rate, Constrained least-squared Estimation, Chi-square test, Root Mean Squared Error, Confidence IntervalsTasa instantánea de declaración de siniestros, estimación por Mínimos Cuadrados con Restricciones, test Ji-cuadrado, Raíz del Error Cuadrático Medio, Intervalos de Confianza
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