The volatility of temperature and pricing of weather derivatives

被引：115

作者：

Benth, Fred Espen

Benth, Jurate Saltyte

机构：

[1] Univ Oslo, Ctr Math Appl, N-0316 Oslo, Norway

[2] Agder Univ Coll, Dept Econ & Business Adm, N-4604 Kristiansand, Norway

[3] Univ Oslo, Helse Ost Hlth Serv Res Ctr, Fac Med, N-1478 Lorenskog, Norway

[4] Klaipeda Univ, Dept Syst Res, LT-5808 Klaipeda, Lithuania

来源：

QUANTITATIVE FINANCE | 2007年 / 7卷 / 05期

关键词：

weather derivatives; temperature dynamics; stochastic processes; mean-reversion; seasonality; heating degree-day futures; options on temperature;

D O I：

10.1080/14697680601155334

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

We propose an Ornstein-Uhlenbeck process with seasonal volatility to model the time dynamics of daily average temperatures. The model is fitted to approximately 45 years of daily observations recorded in Stockholm, one of the European cities for which there is a trade in weather futures and options on the Chicago Mercantile Exchange. Explicit pricing dynamics for futures contracts written on the number of heating/cooling degree-days (so-called HDD/CDD futures) and the cumulative average daily temperature (so-called CAT futures) are calculated, along with a discussion on how to evaluate call and put options with these futures as underlying.

引用

页码：553 / 561

页数：9

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