American Economic Review: Vol. 99 No. 3 (June 2009)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


AER - All Issues

AER Forthcoming Articles

Economic Catastrophe Bonds

Article Citation

Coval, Joshua D., Jakub W. Jurek, and Erik Stafford. 2009. "Economic Catastrophe Bonds." American Economic Review, 99(3): 628-66.

DOI: 10.1257/aer.99.3.628


The central insight of asset pricing is that a security's value depends both on its distribution of payoffs across economic states and on state prices. In fixed income markets, many investors focus exclusively on estimates of expected payoffs, such as credit ratings, without considering the state of the economy in which default occurs. Such investors are likely to be attracted to securities whose payoffs resemble economic catastrophe bonds—bonds that default only under severe economic conditions. We show that many structured finance instruments can be characterized as economic catastrophe bonds, but offer far less compensation than alternatives with comparable payoff profiles. (JEL G11, G12)

Article Full-Text Access

Full-text Article

Additional Materials

Download Data Set (76.97 KB)


Coval, Joshua D. (Harvard U)
Jurek, Jakub W. (Bendheim Center for Finance, Princeton U)
Stafford, Erik (Harvard U)

JEL Classifications

G11: Portfolio Choice; Investment Decisions
G12: Asset Pricing; Trading volume; Bond Interest Rates

American Economic Review

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us