Temperature stochastic modeling and weather derivatives pricing: empirical study with Moroccan data

By Mohammed Mraoua, D. Bari. 2009

50 citations recorded by the source corpus.

The main objective of this paper is to present a technique for pricing weather derivatives with payout depending on temperature. We start by using the Principle Component Analysis method to fill missing temperature data. Consequently, the cold and the warm periods were determined on the basis of a “clean” data by using a statistical approach. After that, we use historical data over a sucient period to apply a stochastic process that describes the evolution of the temperature. A numerical example of a swap contract pricing is presented, using an approximation formula as well as Monte Carlo simulations.

Subfields: Ecology, Evolution, Behavior and Systematics, Global and Planetary Change, Soil Science

View Paper: https://www.semanticscholar.org/paper/bd0d187f717272a197067063938c386af8025be9

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Global and Planetary Change

1. Steen Koekebakker
2. Fred Espen Benth
3. J. Šaltytė Benth

In Soil Science

1. Steen Koekebakker
2. Fred Espen Benth
3. J. Šaltytė Benth

Citations in the corpus

• Putting a Price on Temperature * (2007, background): “Mraoua & Bari (2005) suggest a mean-reverting model with stochastic volatility, also being mean-reverting, for the temperature evolution in Casablanca, Morocco.”