The Relative Importance of Trends, Distributions and the Number of Years of Data in the Pricing of Weather Options

13 Pages Posted: 13 Apr 2004

Date Written: March 11, 2004

Abstract

Certain methods for the pricing of weather options involve the modelling of trends and distributions of weather indices using historical meteorological data. We address the question of whether the sensitivity of the expected payoff to choice of trend is greater or less than the sensitivity to the choice of distribution or the number of years of data used.

Keywords: Weather derivatives, weather options, trends, distributions, actuarial pricing

JEL Classification: G12

Suggested Citation

Jewson, Stephen, The Relative Importance of Trends, Distributions and the Number of Years of Data in the Pricing of Weather Options (March 11, 2004). Available at SSRN: https://ssrn.com/abstract=516503 or http://dx.doi.org/10.2139/ssrn.516503

Stephen Jewson (Contact Author)

Risk Management Solutions ( email )

London EC3R 8NB
United Kingdom

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