PSI - Issue 44

Lorenzo Hofer et al. / Procedia Structural Integrity 44 (2023) 934–941 Author name / Structural Integrity Procedia 00 (2022) 000–000

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Fig. 4. Failure probability surface for the three Zones (adapted from Hofer et al. 2020).

Fig. 5. Zero-coupon (a) and coupon (b) CAT bond price for the three Zones (adapted from Hofer et al. 2020). Fig. 4 shows the probability of failure & surfaces for Zones 1, 2 and 3, together with the bounds deriving from considering the parameters uncertainties and containing the 80% of the probability. Two cross sections of the surface are also shown, corresponding to planes with T = 2 years, and D = 3 bn €. As a general behaviour common for all the three zones, for a given expiration time T , & decreases as the threshold level D increases, whereas for a given threshold level D , & increases from 0 to 1 over time. & of Zone 1 and Zone 2 are comparable since despite a slightly lower expected loss, Zone 2 has a higher Poisson intensity due to a wider zone area and consequently more events