Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Modelling Environment Changes for Pricing Weather Derivatives

Modelling Environment Changes for Pricing Weather Derivatives AbstractThis paper focuses on modelling environment changes in a way that allows to price weather derivatives in a flexible and efficient way. Applications and importance of climate and weather contracts extends beyond financial markets and hedging as they can be used as complementary tools for risk assessment. In addition, option-based approach toward resource management can offer very special insights on rare-events and allow to reuse derivative pricing methods to improve natural resources management. To demonstrate this general concept, we use Monte Carlo and stochastic modelling of temperatures to evaluate weather options. Research results are accompanied by R and Python code. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scientific Annals of Economics and Business de Gruyter

Modelling Environment Changes for Pricing Weather Derivatives

Download PDF
8 pages

Loading next page...
 
/lp/de-gruyter/modelling-environment-changes-for-pricing-weather-derivatives-4E4Quxf51c
Publisher
de Gruyter
Copyright
© 2017 Stanimir Kabaivanov et al., published by De Gruyter Open
eISSN
2501-3165
DOI
10.1515/saeb-2017-0031
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper focuses on modelling environment changes in a way that allows to price weather derivatives in a flexible and efficient way. Applications and importance of climate and weather contracts extends beyond financial markets and hedging as they can be used as complementary tools for risk assessment. In addition, option-based approach toward resource management can offer very special insights on rare-events and allow to reuse derivative pricing methods to improve natural resources management. To demonstrate this general concept, we use Monte Carlo and stochastic modelling of temperatures to evaluate weather options. Research results are accompanied by R and Python code.

Journal

Scientific Annals of Economics and Business – de Gruyter

Published: Dec 1, 2017

References

  • Temperature Based Indexes Retrieved fromhttp www cmegroup com trading weather temperature based indexes html
  • of three dynamical climate downscaling methods using the Weather Research and Forecasting model of
    Chun
  • Model uncertainty and its impact on the pricing of derivative instruments
    Cont
  • do Stochastic Modeling and Financial Applications in and
    Ivanov
  • The Role of Public and Private Insurance in Reducing Losses from Extreme Weather Events and Asia Pacific of http dx org
    Kunreuther
  • General Framework for Pricing Asian Options Under Markov Processes
    Cai
  • Introduction to Derivatives Derivatives
    Considine
  • Derivatives for Specific Event Risks in Economic Perspectives and Policy
    Turvey
  • Efficiency of Weather Derivatives as Primary Crop Insurance Instruments of and
    Vedenov
  • The Role of Public and Private Insurance in Reducing Losses from Extreme Weather Events and Asia Pacific of http dx org
    Kunreuther
  • Radial basis function partition of unity methods for pricing vanilla basket options with
    Shcherbakov
  • den Producer Calibrating the Ornstein Uhlenbeck model Retrieved fromhttp www statisticshowto com wp content uploads Calibrating the Ornstein pdf
    van
  • do Stochastic Modeling and Financial Applications in and
    Ivanov
  • Homburg Modelling jumps in electricity prices theory and empirical evidence of Derivatives Research
    Seifert
  • den Producer Calibrating the Ornstein Uhlenbeck model Retrieved fromhttp www statisticshowto com wp content uploads Calibrating the Ornstein pdf
    van
  • Lilien Estimating Time Varying Risk Premia in the Term Structure The Model
    Engle
  • Introduction to Derivatives Derivatives
    Considine
  • Insurance Linked Securities Structured Market Solutions
    Hofmann
  • Homburg Modelling jumps in electricity prices theory and empirical evidence of Derivatives Research
    Seifert
  • Efficiency of Weather Derivatives as Primary Crop Insurance Instruments of and
    Vedenov
  • Model uncertainty and its impact on the pricing of derivative instruments
    Cont
  • Temperature Based Indexes Retrieved fromhttp www cmegroup com trading weather temperature based indexes html
  • General Framework for Pricing Asian Options Under Markov Processes
    Cai
  • derivatives valuation and market price of weather risk of http dx org
    Cao
  • Model Selection Framework for Pricing Options https ssrn com abstract
    Orbay
  • Insurance Linked Securities Structured Market Solutions
    Hofmann
  • Model Selection Framework for Pricing Options https ssrn com abstract
    Orbay
  • Derivatives for Specific Event Risks in Economic Perspectives and Policy
    Turvey
  • Can Markets Discipline Government Agencies Evidence from the Weather Derivatives Market The of http dx doi org
    Purnanandam
  • of three dynamical climate downscaling methods using the Weather Research and Forecasting model of
    Chun
  • Radial basis function partition of unity methods for pricing vanilla basket options with
    Shcherbakov
  • Lilien Estimating Time Varying Risk Premia in the Term Structure The Model
    Engle
  • derivatives valuation and market price of weather risk of http dx org
    Cao
  • Can Markets Discipline Government Agencies Evidence from the Weather Derivatives Market The of http dx doi org
    Purnanandam