Modeling and pricing in financial markets for weather derivatives /
Weather derivatives provide a tool for weather risk management, and the markets for these exotic financial products are gradually emerging in size and importance. This unique monograph presents a unified approach to the modeling and analysis of such weather derivatives, including financial contracts...
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Main Authors: | |
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Corporate Authors: | |
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Published: |
World Scientific Pub. Co.,
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Publisher Address: | Singapore ; Hackensack, N.J. : |
Publication Dates: | 2013. |
Literature type: | eBook |
Language: | English |
Series: |
Advanced series on statistical science & applied probability ;
v. 17 |
Subjects: | |
Online Access: |
http://www.worldscientific.com/worldscibooks/10.1142/8457#t=toc |
Summary: |
Weather derivatives provide a tool for weather risk management, and the markets for these exotic financial products are gradually emerging in size and importance. This unique monograph presents a unified approach to the modeling and analysis of such weather derivatives, including financial contracts on temperature, wind and rain. Based on a deep statistical analysis of weather factors, sophisticated stochastic processes are introduced modeling the time and space dynamics. Applying ideas from the modern theory of mathematical finance, weather derivatives are priced, and questions of hedging analyzed. The treatise contains an in-depth analysis of typical weather contracts traded at the Chicago Mercantile Exchange (CME), including so-called CDD and HDD futures. The statistical analysis of weather variables is based on a large data set from Lithuania. The monograph includes the research done by the authors over the last decade on weather markets. Their work has gained considerable attention, and has been applied in many contexts. |
Carrier Form: | 1 online resource (xi,242pages) : illustrations. |
Bibliography: | Includes bibliographical references (pages 231-239) and index. |
ISBN: | 9789814401852 (electronic bk.) |
CLC: | F830.91 |
Contents: | 1. Financial markets for weather. 1.1. The use of weather derivatives. 1.2. Markets for weather derivatives. 1.3. A brief outlook of the monograph -- 2. Data description and exploratory analysis. 2.1. Data. 2.2. Temperature. 2.3. Wind. 2.4. Precipitation. 2.5. Spatial statistics and spatial-temporal modelling. 2.6. Stochastic weather modelling - literature overview -- 3. Spatial-temporal modelling. 3.1. The modelling approach. 3.2. Spatial-temporal model for temperature and wind speed. 3.3. Temporal modelling of precipitation -- 4. Continuous-time models for temperature and wind speed. 4.1. CARMA models. 4.2. Simulation of CARMA processes. 4.3. Linking CARMA to ARMA. 4.4. Recovering the states I: the Kalman filter. 4.5. Recovering the states II: an approxmative L[symbol]-filter. 4.6. CARMA models for temperature and wind speed. 4.7. Speed of reversion to the mean: the half-life -- 5. Pricing of forward contracts on temperature and wind speed. 5.1. Theory on pricing forwards. 5.2. A structure preserving class of measure changes. 5.3. Pricing temperature forwards. 5.4. Analysis of temperature futures prices. 5.5. Pricing wind speed forwards -- 6. Extensions of temperature and wind speed models. 6.1. Stochastic temperature volatility. 6.2. Brownian semistationary processes. 6.3. Fractional models -- 7. Options on temperature and wind. 7.1. Options on temperature futures. 7.2. Options on wind speed futures. 7.3. Geographical hedging -- 8. Precipitation derivatives. 8.1. A continuous-time model for precipitation. 8.2. Pricing derivatives on precipitation -- 9. Utility-based approaches to pricing weather derivatives. 9.1. Indifference pricing. 9.2. Fair pricing by benchmarking to a reference index. 9.3. Pricing by marginal utility. 9.4. The equilibrium approach by Cao and Wei. |