S. A. SOLANILLA BLANCO
A weather derivative is a financial instrument used by companies or individuals to hedge against the risk of weather-related losses. The Chicago Mercantile Exchange (CME) offers trade on futures contracts on the temperature indexes HDD (heating-degree day) and CDD (cooling-degree day). It organizes also a market for plain vanilla call and put options on these futures.
We study the local sensitivity of the (approximate) CDD and HDD futures and option prices with respect to a perturbation in the deseasonalized temperature or in one of its derivatives up to a certain order, determined by the continuous-time autoregressive process which models the deseasonalized temperature in the HDD and CDD indexes.
We also consider an empirical case where a continuous-time process of autoregressive order 3 is fitted to a time series of daily average temperatures (DATs) observed in New York from January 1, 1960 to April 20, 2013. Finally, we perform a study of the local sensitivity of these financial contracts and a posterior analysis of the results.
Palabras clave: HDD and CDD indexes; Temperature based derivatives prices; Continuous-time autoregressive process;
Programado
Procesos estocásticos
11 de junio de 2025 15:30
Sala VIP Jaume Morera i Galícia