Wharton Research Scholars

Document Type

Thesis or dissertation

Date of this Version

May 2008


This paper is posted at ScholarlyCommons@Penn.


The management of catastrophic risk comprises a growing social, political, and economic challenge of our time. Recent natural disasters have dramatized the need for supplemental insurance avenues, including long term insurance and multiyear cat bonds, which hedge against long term liability exposure. An empirical examination of cat bond issuance volume over the past decade reveals that long term, multiyear cat bonds with tenors of more than 3 years pale in liquidity versus short term cat bonds. The paper helps to explain this asymmetry by building an integrated behavioral finance model for economic decision making in catastrophic contexts and by using results from the investor psychology literature.


catastrophic risk, insurance, capital markets, cat bonds, long term insurance, behavioral finance, investor psychology



Date Posted: 08 October 2008

This document has been peer reviewed.