Asked by Angelica Hyles on May 19, 2024
Verified
________ bonds represent a novel way of obtaining insurance from capital markets against specified disasters.
A) Asset-backed bonds
B) TIPS
C) Catastrophe
D) Pay-in-kind
Catastrophe Bonds
Insurance-linked securities issued by insurance companies to transfer major risks from the issuer to investors, typically used for natural disaster risks.
Asset-Backed Bonds
Bonds that are secured by a pool of assets, such as loans or receivables, which generate the cash flow to pay bondholders.
TIPS
Treasury Inflation-Protected Securities, a type of U.S. Treasury bond designed to help investors protect against inflation.
- Comprehend the traits and varieties of bonds.
Verified Answer
GC
Gavin CagleMay 24, 2024
Final Answer :
C
Explanation :
Catastrophe bonds are designed to transfer the risk of natural disasters or other catastrophic events from the issuer to investors in the capital markets. In exchange for investing in the bond, investors receive high yields, but they also risk losing some or all of their principal if the specified catastrophe occurs. Catastrophe bonds are a form of insurance-linked securities and represent a innovative way of obtaining insurance from capital markets.
Learning Objectives
- Comprehend the traits and varieties of bonds.