A Call Option on the Loss Ratio Incurred in Writing

question 61

True/False

A call option on the loss ratio incurred in writing catastrophe insurance with a capped payout is referred to as a maximum call spread.

---

Definitions:

Flood Basalts

Extensive flows of basaltic lava that cover large areas of land or the ocean floor, resulting from massive eruptions.

Magma Generation

The process by which molten rock (magma) is formed, typically through the melting of the Earth's mantle or crust under certain temperature and pressure conditions.

Dikes

Underground structures formed when magma forces itself across rock layers and solidifies.

Shield Volcanoes

broad, gently sloping volcanoes built from highly fluid lava flows, often found in Hawaii.