Closed-Form Expressions for the Beta of a Weather Derivative Portfolio

16 Pages Posted: 16 Jan 2004

Date Written: January 11, 2004

Abstract

We derive closed-form expressions for the regression coefficients between uncapped weather swaps and options and a single weather swap or weather index. The regression coefficient between a portfolio of weather swaps and options and a single weather swap is then a simple extension. This allows fast and precise calculation of the variance minimising swap hedge for a portfolio of weather derivatives.

Keywords: Weather derivatives, hedging, beta

JEL Classification: G13

Suggested Citation

Jewson, Stephen, Closed-Form Expressions for the Beta of a Weather Derivative Portfolio (January 11, 2004). Available at SSRN: https://ssrn.com/abstract=486442 or http://dx.doi.org/10.2139/ssrn.486442

Stephen Jewson (Contact Author)

Risk Management Solutions ( email )

London EC3R 8NB
United Kingdom

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