Weather Derivative Pricing and the Year Ahead Forecasting of Temperature Part 2: Theory
6 Pages Posted: 25 Apr 2004
Date Written: April 24, 2004
In part 1 of this article we showed results from the backtesting of different year ahead forecasting methods for US temperatures. We now attempt to explain some of the features of those results using a simple model and simulations of artificial data.
Keywords: Weather derivatives, backtesting, trends, year ahead forecasting
JEL Classification: G13
Suggested Citation: Suggested Citation