Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 1: Empirical Results
21 Pages Posted: 25 Apr 2004
Date Written: April 24, 2004
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
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