Application EDGE software and simulations for integrated catastrophe management

Romaniuk M & Ermolieva T (2005). Application EDGE software and simulations for integrated catastrophe management. International Journal of Knowledge and Systems Sciences 2 (2): 1-9.

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Abstract

The aim of this paper is to discuss a spatially explicit integrated framework for management of catastrophic risks. Typical characteristics of catastrophes are highly mutually dependent and heterogeneous losses at locations and the lack of historical information for prediction of catastrophes. This calls for the development of catastrophe generators that would aid historical information on disaster occurrences and for the design of a decision support model assisting in the analysis and estimation of catastrophe management measures. On the example of catastrophe bond, we demonstrate how these models can be efficiently integrated for the development of diversified mechanism for risks prevention, hedging, and sharing. Catastrophes require robust co-existence of ex-ante and post-measures financial as well as structural. Here, in particular, we show that optimal justification/pricing of the catastrophic securities, i.e., cat bonds, depends on complex interplay between these measures, as well as financial markets, and the spatial and temporal patterns of catastrophic occurrences and related losses. Presented approach accounts for long-term perspectives and appropriate discounting, geographical patterns of catastrophes, as well as of the involvement of various agents such as markets, insurers, reinsurers, investors, insured. The framework is of importance for broad communities involved in risks management: markets, investors, insurers and reinsurers for evaluation of exposures and for pricing catastrophe related financial instruments. It is also important for city planners and land use authorities, households and agricultural farmers, etc.

Item Type: Article
Research Programs: Risk, Modeling and Society (RMS)
Bibliographic Reference: International Journal of Knowledge and Systems Sciences; 2(2):1-9 [June 2005]
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 02:17
Last Modified: 23 Feb 2016 12:46
URI: http://pure.iiasa.ac.at/7474

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