Is the climate-linked CAT bond market efficiently priced? A risk–return analysis

IF 6.9 2区经济学 Q1 BUSINESS, FINANCE

Research in International Business and Finance Pub Date : 2025-07-01 DOI:10.1016/j.ribaf.2025.103080

Antonella Cappiello, Emanuele Vannucci

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Abstract

This study offers insights into the catastrophe (CAT) bond market that has the potential to contribute towards further development of this alternative risk transfer product, which can reduce the insurance coverage gap for climate-related catastrophe risk. The study incorporates an econometric analysis, introducing a novel perspective that focuses on assessing the consistency between the (insurance) risk and return ratio for climate-linked CAT bonds that are currently available in the market. This approach verifies if these financial instruments are priced based on the insurance risks they cover. The analysis highlights the presence of market segmentation and provides empirical evidence of pricing inefficiencies, observed as both overpricing and under-pricing across different levels of underlying catastrophic risks. These findings underscore the potential benefits of increased transparency and comprehensive disclosure of market metrics in fostering broader investor participation, including both retail and institutional segments.

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与气候相关的CAT债券市场定价有效吗？风险收益分析

本研究提供了对巨灾债券市场的见解，该市场有可能有助于进一步开发这种替代性风险转移产品，从而减少与气候相关的巨灾风险的保险缺口。该研究结合了计量经济学分析，引入了一种新的视角，侧重于评估目前市场上与气候相关的CAT债券的（保险）风险和回报率之间的一致性。这种方法验证这些金融工具是否基于它们所涵盖的保险风险定价。分析强调了市场分割的存在，并提供了定价效率低下的经验证据，观察到在不同水平的潜在灾难性风险中定价过高和定价过低。这些发现强调了提高透明度和全面披露市场指标在促进更广泛的投资者参与（包括散户和机构投资者）方面的潜在好处。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Research in International Business and Finance BUSINESS, FINANCE-

CiteScore

11.20

自引率

9.20%

发文量

240

期刊介绍： Research in International Business and Finance (RIBAF) seeks to consolidate its position as a premier scholarly vehicle of academic finance. The Journal publishes high quality, insightful, well-written papers that explore current and new issues in international finance. Papers that foster dialogue, innovation, and intellectual risk-taking in financial studies; as well as shed light on the interaction between finance and broader societal concerns are particularly appreciated. The Journal welcomes submissions that seek to expand the boundaries of academic finance and otherwise challenge the discipline. Papers studying finance using a variety of methodologies; as well as interdisciplinary studies will be considered for publication. Papers that examine topical issues using extensive international data sets are welcome. Single-country studies can also be considered for publication provided that they develop novel methodological and theoretical approaches or fall within the Journal''s priority themes. It is especially important that single-country studies communicate to the reader why the particular chosen country is especially relevant to the issue being investigated. [...] The scope of topics that are most interesting to RIBAF readers include the following: -Financial markets and institutions -Financial practices and sustainability -The impact of national culture on finance -The impact of formal and informal institutions on finance -Privatizations, public financing, and nonprofit issues in finance -Interdisciplinary financial studies -Finance and international development -International financial crises and regulation -Financialization studies -International financial integration and architecture -Behavioral aspects in finance -Consumer finance -Methodologies and conceptualization issues related to finance