Weather Derivative Pricing and the Impact of El Nino on Us Temperature: Empirical Tests of an Optimal Categorical Forecasting Scheme

7 Pages Posted: 5 Apr 2005

See all articles by Stephen Jewson

Stephen Jewson

Risk Management Solutions

Shree P. Khare

University Corporation for Atmospheric Research

Date Written: March 2005

Abstract

Weather derivative pricing for US locations can potentially be improved through the judicious use of seasonal forecasts. However, the number of El Nino and La Nina events that appear in the historical record is small and for many locations the signals are weak. We run some simulation-based tests of an optimal categorical forecasting scheme that takes the small sample size and weak signal into account and tries to produce RMSE-optimal seasonal forecasts.

Keywords: Weather derivatives, ENSO, El Nino, La Nina, seasonal forecasts

JEL Classification: G12, G13

Suggested Citation

Jewson, Stephen and Khare, Shree P., Weather Derivative Pricing and the Impact of El Nino on Us Temperature: Empirical Tests of an Optimal Categorical Forecasting Scheme (March 2005). Available at SSRN: https://ssrn.com/abstract=695744 or http://dx.doi.org/10.2139/ssrn.695744

Stephen Jewson

Risk Management Solutions ( email )

London EC3R 8NB
United Kingdom

Shree P. Khare (Contact Author)

University Corporation for Atmospheric Research ( email )

P.O. Box 3000
Boulder, CO 80307-3000
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
213
Abstract Views
1,646
rank
170,480
PlumX Metrics