Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25317
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dc.contributor.authorHärdle, Wolfgang Karlen_US
dc.contributor.authorLópez Cabrera, Brendaen_US
dc.date.accessioned2009-01-20en_US
dc.date.accessioned2009-07-23T15:15:12Z-
dc.date.available2009-07-23T15:15:12Z-
dc.date.issued2009en_US
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_US
dc.language.isoengen_US
dc.publisher|aSFB 649, Economic Risk|cBerlinen_US
dc.relation.ispartofseries|aSFB 649 discussion paper|x2009,001en_US
dc.subject.jelG19en_US
dc.subject.jelG29en_US
dc.subject.jelN26en_US
dc.subject.jelN56en_US
dc.subject.jelQ29en_US
dc.subject.jelQ54en_US
dc.subject.ddc330en_US
dc.subject.keywordWeather derivativesen_US
dc.subject.keywordweather risken_US
dc.subject.keywordweather forecastingen_US
dc.subject.keywordseasonalityen_US
dc.subject.keywordcontinuous autoregressive modelen_US
dc.subject.keywordstochastic varianceen_US
dc.subject.keywordCAT indexen_US
dc.subject.keywordCDD indexen_US
dc.subject.keywordHDD indexen_US
dc.subject.keywordmarket price of risken_US
dc.subject.keywordrisk premiumen_US
dc.subject.keywordCMEen_US
dc.subject.stwFinanzderivaten_US
dc.subject.stwWetteren_US
dc.subject.stwBörsenkursen_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwRisikoprämieen_US
dc.subject.stwAutokorrelationen_US
dc.subject.stwSaisonbereinigungen_US
dc.subject.stwTheorieen_US
dc.subject.stwDeutschlanden_US
dc.titleImplied market price of weather risken_US
dc.type|aWorking Paperen_US
dc.identifier.ppn590227564en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-

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