When the National Hurricane Center publishes its 2015 end of season report, the contents will be more than academic for ILS investors. The $100m MultiCat Mexico C could face a total default based on the published central pressure measurements of October's Hurricane Patricia.
Dr Tim Hall (from the NASA Goddard Institute) has analysed the relationship between the central pressure observations of historical hurricanes and the final figures reported by the National Hurricane Center (NHC). Using observations for Hurricane Patricia, Dr Hall has used his model to calculate a distribution of the NHC pressure measurements that pertain to the MultiCat Mexico C trigger.
This has allowed Dr Hall to calculate a fair price for the bond that has traded on the secondary market for as little as 4.3 cents in the dollar.
The full version can be downloaded here for $2,800 or by writing to firstname.lastname@example.org.
Posted: Monday, December 7th, 2015