Horizon Value at Risk for Weather Derivatives Part 2: Portfolios

10 Pages Posted: 23 Feb 2004

Date Written: December 10, 2003

Abstract

We describe two methods for the calculation of horizon value at risk for portfolios of weather derivative contracts. Both methods are based on stochastic processes for the expected indices of the contracts. The simpler of the two methods involves a linearisation, and is only appropriate for short horizons. The more complex of the two methods is appropriate for any horizon, and coincides with the expiry value at risk when the horizon coincides with expiry.

Keywords: weather, weather derivatives, value at risk , horizon value at risk

JEL Classification: G13

Suggested Citation

Jewson, Stephen, Horizon Value at Risk for Weather Derivatives Part 2: Portfolios (December 10, 2003). Available at SSRN: https://ssrn.com/abstract=478051 or http://dx.doi.org/10.2139/ssrn.478051

Stephen Jewson (Contact Author)

Risk Management Solutions ( email )

London EC3R 8NB
United Kingdom

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