Valuation and hedging of weather derivatives on monthly average temperature

Valuation and Hedging of Credit Derivatives

Equilibrium Valuation of Weather Derivatives¤

This paper proposes and implements an equilibrium valuation framework for weather derivatives. We generalize the Lucas model of 1978 to include the weather as a fundamental variable in the economy. The model is specialized to temperature derivatives. Temperature behavior for the period of 1979-1989 is closely studied for ̄ve major cities in the U.S., and a model is proposed for the daily temper...

Pde Approach to Valuation and Hedging of Credit Derivatives

Our aim is to examine the PDE approach to the valuation and hedging of a defaultable claim in various settings; this allows us to emphasize the importance of the choice of the traded assets. We start with a general model for the dynamics of the traded primary assets. Subsequently, we specify particular models and we deal with particular defaultable claims such as, for instance, survival claims....

Weather Derivatives and Stochastic Modelling of Temperature

We propose a continuous-time autoregressive model for the temperature dynamics with volatility being the product of a seasonal function and a stochastic process. We use the Barndorff-Nielsen and Shephard model for the stochastic volatility. The proposed temperature dynamics is flexible enough to model temperature data accurately, and at the same time being analytically tractable. Futures prices...

Dual Valuation and Hedging of Bermudan Options

Some years ago, a different characterization of the value of a Bermudan option was discovered which can be thought of as the viewpoint of the seller of the option, in contrast to the conventional characterization which took the viewpoint of the buyer. Since then, there has been a lot of interest in finding numerical methods which exploit this dual characterization. This paper presents a pure du...