Taking flood catastrophe risk in China as the research background, aiming at the characteristics of flood loss ``low frequency and high loss'', Bayesian inference method is used to fit the loss distribution, and Bayesian inference is used to obtain the loss frequency distribution and loss quota distribution of flood in China.
On this basis, Monte Carlo simulation method is used to calculate the probability distribution of annual flood loss in China under different trigger conditions, and then CAPM is used to study the pricing of flood catastrophe bonds in China. It is concluded that under different trigger conditions, as the trigger value increases gradually, the corresponding trigger is triggered. Comparing the three types of bonds, it can be found that the price of bonds decreases with the decrease of principal guarantee ratio and the increase of principal loss ratio, that is, the investment risk is directly proportional to the return, which provides reference for
issuing flood catastrophe bonds in China.
OU Hui,XIE Zhendong,LI Junxiong等. Research on Flood Loss Distribution and Catastrophe Bond Pricing Based on Bayesian Inference[J]. CHINESE JOURNAL OF APPLIED PROBABILITY AND STATIST, 2020, 36(6): 605-618.