Pandemic Risk Management for Public Health Care Schemes.

The coronavirus disease 2019 (COVID-19) caused by a novel coronavirus, severe acute respiratory syndrome coronavirus 2, has caused a large death, a range of serious health problems, and significant economic costs in many countries around the world. This study analyzes statistical characteristics of pandemic disasters using historical records since the Middle Ages. Compared to literature which studies the effect of the COVID- 19 pandemic on the financial market, this paper attempts to find two financial instruments in the financial market to hedge pandemic risks. Two instruments could be useful for public health care schemes to increase their assets or decrease their liabilities during the pandemic period, namely, assets in the form of a biotechnology investment portfolio and liabilities in the form of pandemic bonds. Empirical results show the feasibility of such instruments and the informational efficiency of the U.S. stock market.