Abstract
This paper investigates price uncertainties in weather derivatives contracts through a bootstrap approach. Futures prices are computed under a periodic ARMA model in an actuarial framework for two different locations, Paris and Chicago. We show that statistical errors may lead to substantial uncertainties on futures prices with confidence intervals up to 10% of the assessed prices.
KEYWORDS: Weather derivatives, temperature, ARMA model, parameter uncertainty, model risk, bootstrap.
Volume
Bergen, Norway
Year
2004
Categories
Financial and Statistical Methods
Statistical Models and Methods
Boot-Strapping and Resampling Methods
Publications
ASTIN Colloquium
