Post by Sapphire Capital on Aug 23, 2008 2:33:25 GMT 4
Closed-Form Expressions for the Pricing of Weather Derivatives: The Expected Payoff for t-Distributed Indices
Stephen Jewson
Risk Management Solutions - Weather Risk
August 8, 2008
Abstract:
We derive closed-form expressions for the expected payoff of weather derivatives contracts for a t distributed weather index. There are three common situations in which t distributions might serve as a reasonable model for weather indices: first, some weather variables may be t distributed; second the t distribution can be used as a fatter-tailed alternative to the normal distribution as a stress test or model alternative;and third, objective Bayesian predictions of normally distributed data are t distributed.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1212528_code343765.pdf?abstractid=1212528&mirid=2
Stephen Jewson
Risk Management Solutions - Weather Risk
August 8, 2008
Abstract:
We derive closed-form expressions for the expected payoff of weather derivatives contracts for a t distributed weather index. There are three common situations in which t distributions might serve as a reasonable model for weather indices: first, some weather variables may be t distributed; second the t distribution can be used as a fatter-tailed alternative to the normal distribution as a stress test or model alternative;and third, objective Bayesian predictions of normally distributed data are t distributed.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1212528_code343765.pdf?abstractid=1212528&mirid=2