Pricing of Weather Insurance and Temperature Options and Risk Management Based on Multivariate Temperature Probability Model
Journal Title: International Scientific Research Organization Journal - Year 2018, Vol 3, Issue 1
Abstract
Compared to the Cao-Wei model which only uses the average temperature to express the temperature characteristics, the unit temperature probability model can only be analyzed in the single region. The multivariate temperature probability model can better reflect the climate warming trend and the correlation between different regions. On the basis of the previous research, this paper adds regional data, optimizes the multivariate model, pricing the weather insurance, and pricing the CDD/HDD index option with the model Carol simulation method. Based on the multi model, the Beijing CDD put option is used to optimize the risk hedging of the weather insurance on the basis of the agreement price, and the change of the loss distribution before and after the risk hedging is studied. The results show that weather derivatives can provide reasonable risk hedging for weather insurance and play a good risk management effect.
Authors and Affiliations
Na Niu, Yingzhen Lang, Zhezhi Jin
Keywords
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- EP ID EP312582
- DOI 10.23958/isroj/vol03-i01/02
- Views 84
- Downloads 0
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Pricing of Weather Insurance and Temperature Options and Risk Management Based on Multivariate Temperature Probability Model
Compared to the Cao-Wei model which only uses the average temperature to express the temperature characteristics, the unit temperature probability model can only be analyzed in the single region. The multivariate tempera...