RT Journal Article
SR Electronic
T1 Insurance-Linked Securities (ILS): <em>How to Construct a Performance Index</em>
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 36
OP 64
DO 10.3905/jai.2011.14.2.036
VO 14
IS 2
A1 Lars Jaeger
A1 Ivan Melnychuk
A1 Samuel Scherling
YR 2011
UL https://pm-research.com/content/14/2/36.abstract
AB Increasingly, insurance-linked securities (ILS) are being seen as a source of alternative beta. Modern asset pricing theory suggests a general framework in which risk premia can be systematically modeled. From an investor’s point of view, this framework suggests a natural question: Besides being described, analyzed, and modeled, can the ILS risk premium be systematically captured and replicated—analogous to the well-known equity risk premium or the more recently discussed alternative beta risk premia? The authors offer a methodology for the construction of a performance index designed to cost-efficiently capture ILS alternative beta. They discuss some implications of the availability of ILS performance indices for both passive and active management of ILS exposures.TOPICS: Security analysis and valuation, mutual funds/passive investing/indexing, performance measurement