Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 1: Empirical Results

Jewson, Stephen; Brix, Anders

doi:10.2139/ssrn.535142

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Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 1: Empirical Results

21 Pages Posted: 25 Apr 2004

See all articles by Stephen Jewson

Anders Brix

Risk Management Solutions

Date Written: April 24, 2004

Abstract

We consider the question of how many years of data and what trends to use to make the year ahead temperature forecasts that are needed in weather derivative pricing. We address this question with a backtesting study using 50 years of historical temperature data for 200 US locations.

Keywords: Weather derivatives, backtesting, forecasting, trends

JEL Classification: G13

Suggested Citation: Suggested Citation

Jewson, Stephen and Brix, Anders, Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 1: Empirical Results (April 24, 2004). Available at SSRN: https://ssrn.com/abstract=535142 or http://dx.doi.org/10.2139/ssrn.535142