Pricing temperature-based weather contracts: An application to China

Ahmet Goncu

doi:10.1080/13504851.2010.537619

Pricing temperature-based weather contracts: An application to China

Ahmet Goncu^*

^*Corresponding author for this work

Shandong University

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

This article is the first study to price temperature-based weather derivatives based on the daily average temperatures of Chinese cities, namely Beijing, Shanghai and Shenzhen. A dynamic model with a piecewise constant volatility function, proposed by Alaton et al. (2002), is used for pricing Heating Degree Days (HDD) and Cooling Degree Days (CDD) options. Price estimates for these options are obtained using Monte Carlo simulation and analytical approximation methods.

Original language	English
Pages (from-to)	1349-1354
Number of pages	6
Journal	Applied Economics Letters
Volume	18
Issue number	14
DOIs	https://doi.org/10.1080/13504851.2010.537619
Publication status	Published - Sept 2011
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

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10.1080/13504851.2010.537619

Cite this

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abstract = "This article is the first study to price temperature-based weather derivatives based on the daily average temperatures of Chinese cities, namely Beijing, Shanghai and Shenzhen. A dynamic model with a piecewise constant volatility function, proposed by Alaton et al. (2002), is used for pricing Heating Degree Days (HDD) and Cooling Degree Days (CDD) options. Price estimates for these options are obtained using Monte Carlo simulation and analytical approximation methods.",

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Pricing temperature-based weather contracts: An application to China

Abstract

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