Today's word: CAT MODELLING
Theme for this fortnight: INSURANCE
CAT bonds refer to Catastrophe Bonds which are issued by an entity that deals with insurance. The securities may consist of any single or multiple sources of investment grade securities and, generally, pay a higher yield. However, the investor faces the risk of a lower return or even a total loss of investment should a catastrophe occur within the parameters set by the bond issue. CAT modelling refers to programs used to predict the likelihood that a catastrophe will occur.