Modeling temperature behaviors: Application to weather derivative valuation

Jr Wei Huang, Sharon S. Yang, Chuang Chang Chang

研究成果: 雜誌貢獻期刊論文同行評審

8 引文 斯高帕斯(Scopus)

摘要

This article investigates temperature behavior to develop a temperature model. The proposed ARFIMA Seasonal GARCH model that allows for long memory effects and other important temperature properties provides better goodness of fits and forecasting accuracy using daily average temperatures in six U.S. cities. The effect of temperature behavior on pricing temperature derivatives is analyzed. We propose an equilibrium option pricing framework for HDD and CDD forward and option contracts under the ARFIMA Seasonal GARCH model. The investigation of temperature properties and the valuation framework in this study contributes to the development of a standardized temperature model for weather derivative markets.

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頁(從 - 到)1152-1175
頁數24
期刊Journal of Futures Markets
38
發行號9
DOIs
出版狀態已出版 - 9月 2018

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