Rainfall Indexation for Evaluating Rainfall Risk Profile of Indian Subcontinent
Indian Journal of Finance, 2020
Posted: 4 Jan 2021
Date Written: October 20, 2020
This paper introduced a new set of rainfall indices which can be used as building blocks for designing rainfall derivatives contracts. Such a set was defined as deficit rainy days (DRD)/ excess rainy days (ERD) indices and computed for selected meteorological sub-divisions of India. The study aimed to explore the volatility and other statistical properties of DRD/ERD indices in order to assess the rainfall risk profile of the Indian subcontinent. The methodology proceeded in a step-wise form: Empirical values of DRDs/ERDs over 50 years for selected MSDs of India were derived, and then these index values were analyzed for determining the degree of variability, followed by the examination of the degree of intercorrelation amongst indices of selected meteorological sub-divisions. The paper provided insights on the behavior of the volatility of the proposed indices and their potential application in designing rainfall derivatives contracts.
Keywords: Rainfall Risk, Rainfall Indexation, Deficit Rainy Day (DRDs), Excess Rainy Days (ERDs), Rainfall Derivatives
JEL Classification: G22, G28, Q14, Q59
Suggested Citation: Suggested Citation