Download or read book Weather Derivative Pricing and the Distributions of Standard Weather Indices on Us Temperatures written by Stephen Jewson and published by . This book was released on 2004 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: The standard indices used in the US weather derivatives market are based on monthly and seasonal heating degree days in winter and monthly and seasonal cooling degree days in summer. The pricing of weather options necessitates estimating the distribution of possible values for these indices. We assess to what extent it is safe to assume that these distributions can be modelled using a normal distribution.
Download or read book Weather Derivative Valuation written by Stephen Jewson and published by Cambridge University Press. This book was released on 2005-03-10 with total page 393 pages. Available in PDF, EPUB and Kindle. Book excerpt: Originally published in 2005, Weather Derivative Valuation covers all the meteorological, statistical, financial and mathematical issues that arise in the pricing and risk management of weather derivatives. There are chapters on meteorological data and data cleaning, the modelling and pricing of single weather derivatives, the modelling and valuation of portfolios, the use of weather and seasonal forecasts in the pricing of weather derivatives, arbitrage pricing for weather derivatives, risk management, and the modelling of temperature, wind and precipitation. Specific issues covered in detail include the analysis of uncertainty in weather derivative pricing, time-series modelling of daily temperatures, the creation and use of probabilistic meteorological forecasts and the derivation of the weather derivative version of the Black-Scholes equation of mathematical finance. Written by consultants who work within the weather derivative industry, this book is packed with practical information and theoretical insight into the world of weather derivative pricing.
Download or read book Weather Derivatives written by Antonis Alexandridis K. and published by Springer Science & Business Media. This book was released on 2012-11-30 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: Weather derivatives are financial instruments that can be used by organizations or individuals as part of a risk management strategy to minimize risk associated with adverse or unexpected weather conditions. Just as traditional contingent claims, a weather derivative has an underlying measure, such as: rainfall, wind, snow or temperature. Nearly $1 trillion of the U.S. economy is directly exposed to weather-related risk. More precisely, almost 30% of the U.S. economy and 70% of U.S. companies are affected by weather. The purpose of this monograph is to conduct an in-depth analysis of financial products that are traded in the weather market. Presenting a pricing and modeling approach for weather derivatives written on various underlying weather variables will help students, researchers, and industry professionals accurately price weather derivatives, and will provide strategies for effectively hedging against weather-related risk. This book will link the mathematical aspects of the modeling procedure of weather variables to the financial markets and the pricing of weather derivatives. Very little has been published in the area of weather risk, and this volume will appeal to graduate-level students and researchers studying financial mathematics, risk management, or energy finance, in addition to investors and professionals within the financial services industry.
Download or read book The Pricing of Weather Derivatives including Meteorological Forecasts written by Elena Parmigiani and published by GRIN Verlag. This book was released on 2014-02-24 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2013 in the subject Business economics - Investment and Finance, grade: 4/4, , language: English, abstract: 1. Abstract This paper analyses weather derivatives and the issue of pricing these financial instruments. The non-tradability of the underlying makes their pricing not straightforward and even if the Chicago Mercantile Exchange began trading the first weather contract in 1999, the market still witnesses very low volumes and is relatively illiquid. This theoretical analysis is focused on instruments whose underlying is temperature, since they are the most traded. Due to the assumption of informational efficient markets, all available information should theoretically be included in the prices. However most existing models focus only on historical observations of temperature, actually excluding some relevant information. The few models that have instead considered weather forecasts are analysed, and in particular the model introduced by Ritter, Musshoff, and Odening to price temperature monthly futures including weather forecasts is described in details. I’ve performed an analysis applying a simplified version of the model described, based on temperature data from Tampa, Florida, in 2007. The results show that models with meteorological forecasts indeed outperform models that ignore them.
Download or read book The Use of Weather Forecasts in the Pricing of Weather Derivatives written by Stephen Jewson and published by . This book was released on 2003 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We discuss how weather forecasts can be used in the pricing of weather derivatives and derive results for the most important types of weather index and contract. We show that calculating the expected payoff of linear contracts on linear indices requires only forecasts of the mean temperature over the contract period. Calculating the expected payoff of linear contracts on non-linear indices requires forecasts of both the mean and the distribution of temperatures, but not of the dependence between temperature distributions on different days. Calculating the expected payoff of non-linear contracts requires forecasts of the full multivariate distribution of temperature over the whole contract. For contracts that extend beyond the end of the available forecasts, correlations between the forecast and the post-forecast periods must be taken into account when estimating this distribution. We present two methods by which this can be achieved, both of which combine information from climatological models of daily temperature with information from probabilistic forecasts.
Download or read book Weather Derivative Pricing and the Normal Distribution written by Stephen Jewson and published by . This book was released on 2006 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: The normal distribution is commonly used to predict weather indices when pricing weather derivatives. The standard method for making such predictions involves calculating an unbiased estimator for the population variance. The variance of the prediction (the predictive variance) is then the unbiased estimator for the population variance with an adjustment to account for sampling error on the mean. This is not, however, the only way to model the predictive variance, and it is not necessarily the best way. We investigate an alternative method, based on adjusting the predictive variance so as to maximise the expected predictive log-likelihood. For the small sample sizes often used in weather derivative pricing the resulting predictive variances are significantly larger than those calculated using the standard method.
Download or read book Weather Derivative Pricing and the Normal Distribution written by Stephen Jewson and published by . This book was released on 2006 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many common weather indices are very close to being normally distributed, and it may be reasonable to assume they are exactly normally distributed for the purpose of pricing weather derivatives. Given that assumption, how should the indices be modelled? We use the expected out-of-sample log-likelihood score to compare 3 schemes: standing normal fitting, adjusted variance normal fitting, and the t-distribution.
Download or read book Encyclopedia of Quantitative Risk Analysis and Assessment written by and published by John Wiley & Sons. This book was released on 2008-09-02 with total page 2163 pages. Available in PDF, EPUB and Kindle. Book excerpt: Leading the way in this field, the Encyclopedia of Quantitative Risk Analysis and Assessment is the first publication to offer a modern, comprehensive and in-depth resource to the huge variety of disciplines involved. A truly international work, its coverage ranges across risk issues pertinent to life scientists, engineers, policy makers, healthcare professionals, the finance industry, the military and practising statisticians. Drawing on the expertise of world-renowned authors and editors in this field this title provides up-to-date material on drug safety, investment theory, public policy applications, transportation safety, public perception of risk, epidemiological risk, national defence and security, critical infrastructure, and program management. This major publication is easily accessible for all those involved in the field of risk assessment and analysis. For ease-of-use it is available in print and online.
Download or read book Weather Derivative Pricing and the Modelling of Trends written by Stephen Jewson and published by . This book was released on 2008 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Published methods for the pricing of weather derivatives are based on classical statistics, in that the predictions of the distributions of weather indices that they use are based on best estimates of model parameters. It is likely that such methods do not accurately capture the true uncertainty because they either ignore or approximate parameter and model uncertainty. In this article we derive the objective Bayesian versions of the flat-line and linear-trend models. The use of objective Bayesian statistics allows us to incorporate parameter uncertainty into the predictive distribution in a simple way. The result is a change in the shape of the predictive distribution, but no change in the predicted mean and variance, when compared with comparable classical statistical methods. We also derive a Bayesian version of the damped linear-trend model, which, in a limited sense, also incorporates model uncertainty.
Download or read book Weather Derivative Pricing and the Potential Accuracy of Daily Temperature Modelling written by Stephen Jewson and published by . This book was released on 2004 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: We perform a further investigation into the question of how best to estimate the distribution of a future weather index. In particular we investigate to what extent a perfect daily temperature simulation model would outperform a perfect index simulation model.
Download or read book Closed Form Expressions for the Pricing of Weather Derivatives written by Stephen Jewson and published by . This book was released on 2008 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive closed-form expressions for the expected payoff of weather derivatives contracts for a t distributed weather index. There are three common situations in which t distributions might serve as a reasonable model for weather indices: first, some weather variables may be t distributed; second the t distribution can be used as a fatter-tailed alternative to the normal distribution as a stress test or model alternative;and third, objective Bayesian predictions of normally distributed data are t distributed.
Download or read book Closed Form Expressions for the Pricing of Weather Derivatives written by Stephen Jewson and published by . This book was released on 2003 with total page 5 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive closed-form expressions for the variance of the payoff of a number of types of weather derivative contract under the assumption of a gamma distributed settlement index.
Download or read book Extracting Information from the Market to Price the Weather Derivatives written by Helene Hamisultane and published by . This book was released on 2007 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Weather derivatives were first launched in 1996 in the United-States to allow companies to protect themselves against weather fluctuations. Even now their valuation still remains tricky. Because their underlying is not a traded asset, the weather options cannot be priced by using the Black and Scholes formula. Other pricing methods were proposed but they cannot be calibrated to the market since there are no available weather option price. However, quoted prices exist for the weather futures. The purpose of this paper is to extract two types of information from these prices, the risk-neutral distribution and the market price of risk, to value the weather derivatives. The prices are calculated by assuming that the daily average temperature obeys a mean-reverting jump-EGARCH process since it is shown that the temperature is not normally distributed and exhibits a time-varying volatility.
Download or read book Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 2 written by Stephen Jewson and published by . This book was released on 2004 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: In part 1 of this article we showed results from the backtesting of different year ahead forecasting methods for US temperatures. We now attempt to explain some of the features of those results using a simple model and simulations of artificial data.
Download or read book Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 1 written by Stephen Jewson and published by . This book was released on 2004 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the question of how many years of data and what trends to use to make the year ahead temperature forecasts that are needed in weather derivative pricing. We address this question with a backtesting study using 50 years of historical temperature data for 200 US locations.
Download or read book Temperature Models for Pricing Weather Derivatives written by Frank Schiller and published by . This book was released on 2012 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present four models for predicting temperatures that can be used for pricing weather derivatives. Three of the models have been suggested in prior literature, and we suggest another model which uses splines to remove trend and seasonality effects from temperature time series in a flexible way. Using historical temperature data from 35 weather stations across the United States, we test the performance of the models by evaluating virtual heating degree days (HDD) and cooling degree days (CDD) contracts. We find that all models perform better when predicting HDD indices than predicting CDD indices. However, all models based on a daily simulation approach significantly underestimate the variance of the errors.
Download or read book Aviation Weather for Pilots and Flight Operations Personnel written by United States. Federal Aviation Administration and published by . This book was released on 1975 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt:
