In this paper, we study the pricing and hedging of catastrophe European option when catastrophe loss
is described by a regime-switching jump di?usion process. We derive the close-form pricing formula of
catastrophe European options and brie°y discuss the pricing issue of catastrophe bonds. We extend
the formulas of static hedging strategies to the regime-switching setting and provide some discussions
on the static hedging of catastrophe options. Numerical examples show that static hedging strategy of
catastrophe options is effective.
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