Determining the Fair Price of Weather hedging

Miroslava Mahlebashieva

Business & Management Compass, 2013, issue 3, 93-105

Abstract: The present article brings to the fore the issue of the fair pricing of hedging against climatic risks in Bulgaria by applying an actuarial approach for determining the price of a climatic put option. On the basis of data on the daily maximum and minimum temperatures in the town of Varna for the period from 2007 to 2010 there has been developed and evaluated a model of average daily temperatures, which summarizes the main characteristics of the process of air temperatures: long-term trend, seasonal cycle, autocorrelation and heteroscedasticity.

Keywords: climatic options; pricing; actuarial methods; modelling of temperatures; simulation (search for similar items in EconPapers)
JEL-codes: C53 G13 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:vrn:journl:y:2013:i:3:p:93-105

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