Estimation Risk and the Pricing of Weather Derivatives

Olivier Roustant 1 Jean-Paul Laurent 2 Xavier Bay 1 Laurent Carraro 1
1 3MI-ENSMSE - Département Méthodes et Modèles Mathématiques pour l'Industrie
2 SAF - Laboratoire de Sciences Actuarielle et Financière
Abstract : Temperature modelling is a major issue for valuation of weather derivatives. Goodness of fit is usually assessed from historical data. However, estimation errors can result in large price uncertainty that may be problematic for practical applications. In this paper, we consider a temperature ARMA model and quantify the price uncertainties for weather Futures and options. In addition we look for sources of uncertainty, and point out the major defects of the model.
Keywords : weather derivative price uncertainty bootstrap
Type de document :
Communication dans un congrès
AFFI rencontre chercheurs / industrie financière, Dec 2001, Paris, France. 2002
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https://hal-emse.ccsd.cnrs.fr/emse-00745082
Contributeur : Florent Breuil <>
Soumis le : mercredi 24 octobre 2012 - 15:09:47
Dernière modification le : jeudi 3 mai 2018 - 09:42:34

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  • HAL Id : emse-00745082, version 1

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Olivier Roustant, Jean-Paul Laurent, Xavier Bay, Laurent Carraro. Estimation Risk and the Pricing of Weather Derivatives. AFFI rencontre chercheurs / industrie financière, Dec 2001, Paris, France. 2002. 〈emse-00745082〉

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