Acta Oeconomica Pragensia 2007, 15(4):39-48 | DOI: 10.18267/j.aop.72

Weather Derivatives

Jan Pígl
Ing. Jan Pígl - student of doctoral study; Department of Monetary Theory and Policy, Faculty of Finance and Accounting, University of Economics, Prague, nám. W. Churchilla 4, 130 67, Prague 3, Czech Republic, piglj@vse.cz

The article deal with the problems of weather derivatives which take the value in sequence nowadays. The aim of this work is the definition of weather derivatives and the way how to price them. We show as well that linear and nonlinear models of time series of temperatures measured in Prague and in Brno have not good results in the estimation of parameters μI and σI of the probability distribution function P(I) of the weather index which is essential in their pricing.

Keywords: weather derivatives, pricing weather derivatives, time series
JEL classification: C32

Published: August 1, 2007  Show citation

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Pígl, J. (2007). Weather Derivatives. Acta Oeconomica Pragensia, 15(4), 39-48. doi: 10.18267/j.aop.72
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    References

    1. ARLT, J.; ARLTOVÁ, M. (2007). Ekonomické časové řady. Praha : Grada, 2007.
    2. CABALLERO, R. (2003). Stochastic modeling of daily temperature time series for use in weather derivative pricing. Technical Report. [on-line], Dublin, University College Dublin, c2003, [cit. 31. 3. 2007], <http://maths.ucd.ie/~rca/publications/pdf/arfima.pdf>.
    3. CABALLERO, R.; JEWSON, S.; BRIX, A. (2002). Long memory in surface air temperature: Detection, modeling, and application to weather derivative valuation. Climate Research, 2007, vol. 21, no. 1, pp. 12701140. Go to original source...

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