IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Extracting Information from the Market to Price the Weather Derivatives

Listed author(s):
  • Hélène Hamisultane


    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Weather derivatives were first launched in 1996 in the United-States to allow companies to protect themselves against weather fluctuations. Even now their valuation still remains tricky. Because their underlying is not a traded asset, the weather options cannot be priced by using the Black and Scholes formula. Other pricing methods were proposed but they cannot be calibrated to the market since there are no available weather option price. However, quoted prices exist for the weather futures. The purpose of this paper is to extract two types of information from these prices, the risk-neutral distribution and the market price of risk, to value the weather derivatives. The prices are calculated by assuming that the daily average temperature obeys a mean-reverting jump-EGARCH process since it is shown that the temperature is not normally distributed and exhibits a time-varying volatility.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by HAL in its series Working Papers with number halshs-00079192.

in new window

Date of creation: 2007
Handle: RePEc:hal:wpaper:halshs-00079192
Note: View the original document on HAL open archive server:
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00079192. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.