Simple Models for the Volatility of Weather Derivative Underlyings

20 Pages Posted: 23 Feb 2004

Date Written: December 8, 2003

Abstract

We discuss how a surrogate underlying process for weather derivatives can be defined using the expected settlement index. We then present four deterministic models for the volatility of this process: a simple top-hat model, a trapezium model that includes the ramping effects of forecasts, and seasonally varying versions of both of these models.

Keywords: weather, weather derivatives, weather volatility

JEL Classification: G13

Suggested Citation

Jewson, Stephen, Simple Models for the Volatility of Weather Derivative Underlyings (December 8, 2003). Available at SSRN: https://ssrn.com/abstract=477163 or http://dx.doi.org/10.2139/ssrn.477163

Stephen Jewson (Contact Author)

Risk Management Solutions ( email )

London EC3R 8NB
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
410
Abstract Views
2,234
rank
87,142
PlumX Metrics