Local sensitivity analysis of heating degree day and cooling degree day temperature derivative prices

Sara Solanilla Blanco

Quantitative Finance, 2025, vol. 25, issue 4, 653-670

Abstract: We study the local sensitivity of heating degree day (HDD) and cooling degree day (CDD) temperature futures and option prices with respect to perturbations in the deseasonalized temperature or in one of its derivatives up to a certain order determined by the continuous-time autoregressive process modelling the deseasonalized temperature in the HDD and CDD indexes. We also consider an empirical case where a continuous-time process of autoregressive order 3 is fitted to New York temperatures and we perform a study of the local sensitivity of these financial contracts and a posterior analysis of the results.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2025.2471347 (text/html)
Access to full text is restricted to subscribers.

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:taf:quantf:v:25:y:2025:i:4:p:653-670

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2025.2471347

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().