What is a cat bond?
2 bonds from cats are generally with a high yield with some significant and unique risks. These are complicated debt products that often relate to the way in which the insurance applies to the property, region or asset.
A specific feature of many cat bonds is that in the case of a certain disaster the debt is actually written off and the debtor may fail. The way it works differs from one binding to another, but it is this aspect of cat ties that represents the most risks to the creditors or those holding handcuffs with high yields. In exchange for higher returns, bond holder takes this risk part of a diversified portfolio.
Some financial experts today offer cat bonds as a way of diversification of risk. One aspects of Thna some of some cat bonds are the fact that they are not bound to stock sectors or other market events. Rather jSOU associated with events in the real world and natural situations. This means that the investor who is well diversified can lose realistically from negative events on the market or negative events in the real world and still profits even in problem times. Whether this is true for each individual investor is something to be assessed on the basis of the case, but with the highly complicated statistical modeling that some traders use, cat bonds look good as a diversification tool.
One of the most important dangers of cat bond is that investors are not always fully informed about what they buy for their money. For someone who is easily willing to risk a high -yield bond and a higher chance of default value, investing in these tools can be considered “fair play”, but because so much average investment capital is felt -red through shop tables and brokers, there are many chances to hold a risk phonDy cat bonds or other similar shares without really knowing what the risks are.
Some of the most important financial journalists of recent times dealt with the advantages and disadvantages of the cat bundle. Financial author Michael Lewis explored a large part of the nature of these bonds in the work of the New York Times called "In the Casino of Nature". Traders and others who look more at the CAT bond because the derivative product traded on the market gains insight on how sophisticated financiers basically bet on natural disasters, with all the risks and benefits it requires.