This article develops a contingent claim model to price a default-risky, catastrophe-linked bond. This model incorporates stochastic interest rates and more generic loss processes and allows for practical considerations of moral hazard, basis risk, and default risk. The authors compute default-free and default-risky CAT bond prices by using the Monte Carlo method. The results show that both moral hazard and basis risk drive down the bond prices substantially; these effects should not be ignored in pricing the CAT bonds. The authors also show how the bond prices are related to catastrophe occurrence intensity, loss volatility, trigger level, the issuing firm's capital position, debt structure, and interest rate uncertainty.

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Background and Objective This study aimed to develop pH‐responsive polylactide‐glycolic acid co‐polymer and chitosan (PLGA/chitosan) nanosphere as an inflammation‐responsive vehicle and evaluate the potential of the nanosphere encapsulating metronidazole, an antibiotic, and N‐phenacylthiazolium bromide (PTB), a host modulator, for treating periodontitis. Material and Methods PLGA/chitosan nanospheres were fabricated using oil‐in‐water emulsion method. Experimental periodontitis was induced on the rat maxillae, and the sites were randomly allocated to four treatment categories, including periodontitis alone (PR), periodontitis with nanospheres alone, nanospheres encapsulating metronidazole (MT) and nanospheres encapsulating PTB (PB). The ligature was retained until the animals were killed, and the treatment outcome was evaluated by the progression of periodontal bone loss (PPBL), inflammatory cell infiltration and collagen deposition. Results The encapsulated drug was released rapidly from the nanospheres without significant initial burst release at pH 5.5. Compared with group PR, PPBL was significantly reduced in groups MT and PB on day 4 (P<.05). On day 21, PPBL was significantly lower in group PB (P<.05). In groups MT and PB, inflammation was significantly reduced in groups MT and PB relative to groups PR and periodontitis with nanospheres alone (P<.05), and collagen deposition was significantly greater relative to group PR (P<.05). Conclusion PLGA/chitosan nanospheres encapsulating metronidazole or PTB showed potential for modulating periodontitis progression.