Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 2: Theory

Jewson, Stephen

doi:10.2139/ssrn.535143

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Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 2: Theory

6 Pages Posted: 25 Apr 2004

See all articles by Stephen Jewson

Stephen Jewson

Risk Management Solutions

Date Written: April 24, 2004

Abstract

In part 1 of this article we showed results from the backtesting of different year ahead forecasting methods for US temperatures. We now attempt to explain some of the features of those results using a simple model and simulations of artificial data.

Keywords: Weather derivatives, backtesting, trends, year ahead forecasting

JEL Classification: G13

Suggested Citation: Suggested Citation

Jewson, Stephen, Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 2: Theory (April 24, 2004). Available at SSRN: https://ssrn.com/abstract=535143 or http://dx.doi.org/10.2139/ssrn.535143