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 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 Surface Air Temperature 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: The actuarial pricing of weather swaps often depends on predicting the temperature several months in advance. Such predictions can be made by modelling the trends in historical temperature indices and extrapolating them forward in time. Linear trends are one of the simplest types of trend model one can use. They have two parameters: the mean level, and the trend rate. The mean level is probably best estimated from local data, but it is not obvious how best to estimate the trend rate: in this study we compare the performance of predictions based on local and global trend rate estimates.
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 Derivative Pricing and the Year Ahead Forecasting of Surface Air Temperature 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 pricing of temperature derivatives is often based on statistical methods that predict the surface air temperature a year in advance. We perform an empirical comparison of three simple methods for such year-ahead temperature forecasting and draw clear conclusions about their relative merits. The three methods we consider are the standard flat-line and best-fit linear detrending methods and the recently introduced damped linear detrending method.
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 Optimal Year Ahead Forecasting of Temperature in the Presence of a Linear Trend and the Pricing of Weather Derivatives written by Stephen Jewson and published by . This book was released on 2004 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the question of how to predict air temperatures a year in advance. We introduce a new prediction scheme that generalizes the standard flat line and best fit linear trend models and gives RMSE optimal predictions when the real trend is linear.
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 Weather Derivative Pricing with Nonlinear Weather Forecasting written by Gal Zahavi and published by . This book was released on 2014 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years we witnessed a rapid growth of weather derivatives market. These derivatives are used to hedge energy contracts and distribute weather risk. While most derivative markets are complete and contingent climes replications are standard procedure, this special market is incomplete, and therefore modeling the weather is a more appropriate approach to pricing. In this work we base our modeling on a widely accepted physical approach, we use Navier-Stokes equations applied to a thin atmosphere as presented by Lorentz 1962. This modeling is considered by meteorologists a “very-long-weather” prediction, allows for an accurate and robust temperature forecasting. We show that under this setting we empirically outperform the standard approach to weather derivative pricing.
Download or read book Weather Derivative Pricing and a Preliminary Investigation into a Decision Rule for Detrending written by Stephen Jewson and published by . This book was released on 2004 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: Weather derivative pricing is often based on year-ahead forecasts of the weather made using simple statistical models and past weather data. Two of the simplest models in common use are the flat line and linear trend models. We consider the question of how to choose between these two models and test a simple decision rule based on closed-form expressions for the RMSE.
Download or read book Weather Derivative Valuation written by Stephen Jewson and published by . This book was released on 2005 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Time series modelling for weather derivatives pricing written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: O mercado de Derivativos Climáticos no Brasil ainda é incipiente. Uma dasbarreiras que atrapalham o aumento da liquidez no mercado é certamente aincerteza que está por traz da precificação e a falta de conhecimento por váriossetores dos campos de aplicação potenciais desses derivativos. Com o objetivo dereduzir esta incerteza, este estudo revê abordagens para modelar e estabelecerprevisões por modelos de séries temporais para a temperatura na cidade do Rio deJaneiro, e consequentemente para o índice de Cooling Degree Days (CDD) destalocalidade. Três modelos são propostos para a previsão da média diária detemperatura, dois benchmark (Holt-Winters e Box & Jenkins) e um pelaTransformação de Fourier combinado com o processo GARCH para a variância. Osresultados sugerem que o modelo baseado na transformação de Fourier conseguemelhor performance na previsão que os demais.
Download or read book Pricing of Weather Derivatives written by Shih-Ying Lee and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Advances in Risk Management written by G. Gregoriou and published by Springer. This book was released on 2006-11-17 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: This important book brings together an edited series of papers about risk management and the latest developments in the field. Covering topics such as Stochastic Volatility, Risk Dynamics and Portfolio Diversification, this book is vital for optimal portfolio allocation for private and institutional investors, and is an indispensable tool.
Download or read book Weather Derivative Pricing and the Impact of El Nino on Us Temperature written by Stephen Jewson and published by . This book was released on 2005 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: Weather derivative pricing for US locations can potentially be improved through the judicious use of seasonal forecasts. However, the number of El Nino and La Nina events that appear in the historical record is small and for many locations the signals are weak. We run some simulation-based tests of an optimal categorical forecasting scheme that takes the small sample size and weak signal into account and tries to produce RMSE-optimal seasonal forecasts.
Download or read book Pricing of Weather Derivatives written by Anandadeep Mandal and published by LAP Lambert Academic Publishing. This book was released on 2010-12 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: The performance of many firms are exposed to the changes in weather. The industry sectors exposed to 'weather risk' are basic materials, consumer durables and agricultural industries. Amongst these the basic materials has mainly triggered the demand for the weather derivatives market and the rapid growth in the weather risk assessment industry. With this as the backdrop, this book formulates a pricing model for the weather derivatives, whose payoffs depend on surface air temperature. Daily temperature data for the last thirty years is closely analyzed for four cities in U.K. to model a temperature process which captures the daily temperature fluctuations including the seasonal patterns and the year-on- year up-ward trend behaviour of the temperature.This work further evaluates an arbitrage-free option pricing using a Gaussian Ornstein-Uhlenbeck model. Keeping in mind that temperature, the underlying variable of the weather derivative, is non-tradable we consider a risk premium estimator to find the price of a weather derivatives contract. Further, the book provides results based on these models as well as based on Monte Carlo Simulations.
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 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive closed-form expressions for the expected payoff of a number of types of weather derivative contract under the assumption of a normally distributed settlement index.
