THE PRICING OF DEGREE-DAY WEATHER OPTIONS
| dc.creator | Turvey, Calum G. | |
| dc.date | 2017-04-01T13:43:58Z | |
| dc.date.accessioned | 2026-07-09T04:22:35Z | |
| dc.description | This paper presents a model and framework for pricing degree-day weather derivatives when the weather variable is a non-traded asset. Using daily weather data from 1840-1996 it is shown that a degree-day weather index exhibits stable volatility and satisfies the random walk hypothesis. The paper compares the options prices from the recommended model and compares it to a typical insurance-type model. The results show that the insurance model overprices the option value at-the-money and this may explain why the bid-ask spreads in the weather derivatives market is sometimes very large. | |
| dc.identifier | doi:10.22004/ag.econ.34109 | |
| dc.identifier | https://ageconsearch.umn.edu/record/34109/files/wp0205.pdf | |
| dc.identifier | http://ageconsearch.umn.edu/record/34109 | |
| dc.identifier.uri | http://hdl.handle.net/123456789/549005 | |
| dc.language | eng | |
| dc.publisher | ||
| dc.source | http://ageconsearch.umn.edu/record/34109 | |
| dc.title | THE PRICING OF DEGREE-DAY WEATHER OPTIONS | |
| dc.type | Text |