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dc.contributor.authorBenth, Freden_US
dc.contributor.authorHärdle, Wolfgang Karlen_US
dc.contributor.authorLópez Cabrera, Brendaen_US
dc.date.accessioned2009-11-05en_US
dc.date.accessioned2010-08-26T11:57:14Z-
dc.date.available2010-08-26T11:57:14Z-
dc.date.issued2009en_US
dc.identifier.urihttp://hdl.handle.net/10419/39317-
dc.description.abstractWeather derivatives (WD) are different from most financial derivatives because the underlying weather cannot be traded and therefore cannot be replicated by other financial instruments. The market price of risk (MPR) is an important parameter of the associated equivalent martingale measures used to price and hedge weather futures/options in the market. The majority of papers so far have priced non-tradable assets assuming zero MPR, but this assumption underestimates WD prices. We study the MPR structure as a time dependent object with concentration on emerging markets in Asia. We find that Asian Temperatures (Tokyo, Osaka, Beijing, Teipei) are normal in the sense that the driving stochastics are close to a Wiener Process. The regression residuals of the temperature show a clear seasonal variation and the volatility term structure of CAT temperature futures presents a modified Samuelson effect. In order to achieve normality in standardized residuals, the seasonal variation is calibrated with a combination of a fourier truncated series with a GARCH model and with a local linear regression. By calibrating model prices, we implied the MPR from Cumulative total of 24-hour average temperature futures (C24AT) for Japanese Cities, or by knowing the formal dependence of MPR on seasonal variation, we price derivatives for Kaohsiung, where weather derivative market does not exist. The findings support theoretical results of reverse relation between MPR and seasonal variation of temperature process.en_US
dc.language.isoengen_US
dc.publisherSFB 649, Economic Risk Berlinen_US
dc.relation.ispartofseriesSFB 649 discussion paper 2009,046en_US
dc.subject.jelG19en_US
dc.subject.jelG29en_US
dc.subject.jelG22en_US
dc.subject.jelN23en_US
dc.subject.jelN53en_US
dc.subject.jelQ59en_US
dc.subject.ddc330en_US
dc.subject.keywordWeather derivativesen_US
dc.subject.keywordcontinuous autoregressive modelen_US
dc.subject.keywordCATen_US
dc.subject.keywordCDDen_US
dc.subject.keywordHDDen_US
dc.subject.keywordrisk premiumen_US
dc.subject.stwWetteren_US
dc.subject.stwFinanzderivaten_US
dc.subject.stwRisikoprämieen_US
dc.subject.stwAutokorrelationen_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwTheorieen_US
dc.subject.stwAsienen_US
dc.titlePricing of Asian temperature risken_US
dc.typeWorking Paperen_US
dc.identifier.ppn612286762en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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