Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/25317 
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dc.contributor.authorHärdle, Wolfgang Karlen
dc.contributor.authorLópez Cabrera, Brendaen
dc.date.accessioned2009-01-20-
dc.date.accessioned2009-07-23T15:15:12Z-
dc.date.available2009-07-23T15:15:12Z-
dc.date.issued2009-
dc.identifier.urihttp://hdl.handle.net/10419/25317-
dc.description.abstractWeather influences our daily lives and choices and has an enormous impact on cooperate revenues and earnings. Weather derivatives differ from most derivatives in that the underlying weather cannot be traded and their market is relatively illiquid. The weather derivative market is therefore incomplete. This paper implements a pricing methodology for weather derivatives that can increase the precision of measuring weather risk. We applied continous autoregressive models (CAR) with seasonal variation to model the temperature in Berlin and with that to get explicite nature of non-arbitrage prices for temperature derivatives. We infer the implied market price from Berlin cumulative monthly temperature futures that are traded at the Chicago Mercantile Exchange (CME), which is an important parameter of the associated equivalent martingale measures used to price and hedge weather future/options in the market. We propose to study the market price of risk, not only as a piecewise constant linear function, but also as a time dependent. In any of the previous cases, we found that the market price of weather risk is different from zero and shows a seasonal structure. With the extract information we price other exotic options, such as cooling/heating degree day temperatures and non standard contract with crazy maturities.en
dc.language.isoengen
dc.publisher|aHumboldt University of Berlin, Collaborative Research Center 649 - Economic Risk |cBerlinen
dc.relation.ispartofseries|aSFB 649 Discussion Paper |x2009,001en
dc.subject.jelG19en
dc.subject.jelG29en
dc.subject.jelN26en
dc.subject.jelN56en
dc.subject.jelQ29en
dc.subject.jelQ54en
dc.subject.ddc330en
dc.subject.keywordWeather derivativesen
dc.subject.keywordweather risken
dc.subject.keywordweather forecastingen
dc.subject.keywordseasonalityen
dc.subject.keywordcontinuous autoregressive modelen
dc.subject.keywordstochastic varianceen
dc.subject.keywordCAT indexen
dc.subject.keywordCDD indexen
dc.subject.keywordHDD indexen
dc.subject.keywordmarket price of risken
dc.subject.keywordrisk premiumen
dc.subject.keywordCMEen
dc.subject.stwFinanzderivaten
dc.subject.stwWetteren
dc.subject.stwBörsenkursen
dc.subject.stwOptionspreistheorieen
dc.subject.stwRisikoprämieen
dc.subject.stwAutokorrelationen
dc.subject.stwSaisonbereinigungen
dc.subject.stwTheorieen
dc.subject.stwDeutschlanden
dc.titleImplied market price of weather risk-
dc.type|aWorking Paperen
dc.identifier.ppn590227564en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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