Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56658
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dc.contributor.authorHärdle, Wolfgang Karlen_US
dc.contributor.authorOsipenko, Mariaen_US
dc.date.accessioned2011-03-24en_US
dc.date.accessioned2012-04-05T16:13:06Z-
dc.date.available2012-04-05T16:13:06Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/56658-
dc.description.abstractDue to dependency of energy demand on temperature, weather derivatives enable the effective hedging of temperature related fluctuations. However, temperature varies in space and time and therefore the contingent weather derivatives also vary. The spatial derivative price distribution involves a risk premium. We examine functional principal components of temperature variation for this spatial risk premium. We employ a pricing model for temperature derivatives based on dynamics modelled via a vectorial Ornstein-Uhlenbeck process with seasonal variation. We use an analytical expression for the risk premia depending on variation curves of temperature in the measurement period. The dependence is exploited by a functional principal component analysis of the curves. We compute risk premia on cumulative average temperature futures for locations traded on CME and fit to it a geographically weighted regression on functional principal component scores. It allows us to predict risk premia for nontraded locations and to adopt, on this basis, a hedging strategy, which we illustrate in the example of Leipzig.en_US
dc.language.isoengen_US
dc.publisher|aSFB 649, Economic Risk |cBerlinen_US
dc.relation.ispartofseries|aSFB 649 discussion paper |x2011-013en_US
dc.subject.jelC01en_US
dc.subject.jelC31en_US
dc.subject.ddc330en_US
dc.subject.keywordrisk premiumen_US
dc.subject.keywordweather derivativesen_US
dc.subject.keywordOrnstein-Uhlenbeck processen_US
dc.subject.keywordfunctional principal componentsen_US
dc.subject.keywordgeographically weighted regressionen_US
dc.subject.stwWetteren_US
dc.subject.stwRisikoprämieen_US
dc.subject.stwRegionen_US
dc.subject.stwElementarschadenversicherungen_US
dc.subject.stwFinanzderivaten_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwTheorieen_US
dc.titleSpatial risk premium on weather derivatives and hedging weather exposure in electricityen_US
dc.typeWorking Paperen_US
dc.identifier.ppn654789924en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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