Modeling and Pricing in Financial Markets for Weather Derivatives

Fred Espen Benth and Jūratė Šaltytė Benth
Additional contact information
Fred Espen Benth: University of Oslo, Norway
Jūratė Šaltytė Benth: University of Oslo, Norway

in World Scientific Books from World Scientific Publishing Co. Pte. Ltd.

Abstract: 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.

Keywords: Weather Derivatives; Stochastic Processes; HDD; CDD; Autoregressive Moving Average Time Series; Futures Contracts; Options; Utility Pricing; Girsanov Transform; Esscher Transform; Precipitation; Temperature; Wind Speed (search for similar items in EconPapers)
Date: 2012
ISBN: 9789814401845
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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https://www.worldscientific.com/worldscibooks/10.1142/8457 (text/html)
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Chapters in this book:

Ch 1 Financial markets for weather , pp 1-13

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 2 Description of weather data and exploratory analysis , pp 17-34

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 3 Spatial-temporal stochastic modelling of weather , pp 35-73

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 4 Continuous-time models for temperature and wind speed , pp 77-106

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 5 Pricing of forward contracts on temperature and wind speed , pp 107-137

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 6 Extensions of temperature and wind speed models , pp 139-155

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 7 Options on temperature and wind , pp 157-177

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 8 Modelling and pricing derivatives on precipitation , pp 179-195

Fred Espen Benth and Jūratė Šaltytė Benth

Ch 9 Utility-based approaches to pricing weather derivatives , pp 197-227

Fred Espen Benth and Jūratė Šaltytė Benth

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