  Crime can have a volatile impact on investments. Despite the potential
importance of crime rates in investments, there are no indices dedicated to
evaluating the financial impact of crime in the United States. As such, this
paper presents an index-based insurance portfolio for crime in the United
States by utilizing the financial losses reported by the Federal Bureau of
Investigation for property crimes and cybercrimes. Our research intends to help
investors envision risk exposure in our portfolio, gauge investment risk based
on their desired risk level, and hedge strategies for potential losses due to
economic crashes. Underlying the index, we hedge the investments by issuing
marketable European call and put options and providing risk budgets
(diversifying risk to each type of crime). We find that real estate,
ransomware, and government impersonation are the main risk contributors. We
then evaluate the performance of our index to determine its resilience to
economic crisis. The unemployment rate potentially demonstrates a high systemic
risk on the portfolio compared to the economic factors used in this study. In
conclusion, we provide a basis for the securitization of insurance risk from
certain crimes that could forewarn investors to transfer their risk to capital
market investors.
