Modelling Environment Changes for Pricing Weather Derivatives

Stanimir Kabaivanov and Veneta Markovska

Scientific Annals of Economics and Business (continues Analele Stiintifice), 2017, vol. 64, issue 4, 423 - 430

Abstract: This 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. JEL Codes - G13; G17; G18

Keywords: weather derivatives; temperature modelling; Monte Carlo (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://saeb.feaa.uaic.ro/index.php/saeb/article/view/1068 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aic:saebjn:v:64:y:2017:i:4:p:423-430:n:85

Access Statistics for this article

More articles in Scientific Annals of Economics and Business (continues Analele Stiintifice) from Alexandru Ioan Cuza University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Sireteanu Napoleon-Alexandru ().