| Registro completo |
| Provedor de dados: |
AgEcon
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| País: |
United States
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| Título: |
Modeling and Pricing Rain Risk
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| Autores: |
Musshoff, Oliver
Odening, Martin
Xu, Wei
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| Data: |
2006-06-20
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| Ano: |
2006
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| Palavras-chave: |
Weather risk
Weather derivatives
Precipitation model
Basis risk
Resource /Energy Economics and Policy
Risk and Uncertainty
C8
Q14
Q54
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| Resumo: |
In this paper we price a precipitation option based on empirical weather data from Germany using different pricing methods, among them Burn Analysis, Index Value Simulation and Daily Simulation. For that purpose we develop a daily precipitation model. Moreover, a decorrelation analysis is proposed to assess the spatial basis risk that is inherent to rainfall derivatives. The models are applied to precipitation data in Brandenburg, Germany. Based on simplifying assumptions of the production function, we quantify and compare the risk exposure of grain producers with and without rainfall insurance. It turns out that a considerable risk remains with producers who are remotely located from the weather station. Another finding is that significant differences may occur between the pricing methods. We identify the strengths and weaknesses of the pricing methods and give some recommendations for their applications. Our results are relevant for producers as well as for potential sellers of weather derivatives.
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| Tipo: |
Conference Paper or Presentation
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| Idioma: |
Inglês
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| Identificador: |
22704
http://purl.umn.edu/25386
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| Editor: |
AgEcon Search
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| Relação: |
International Association of Agricultural Economists>2006 Annual Meeting, August 12-18, 2006, Queensland, Australia
Contributed Paper
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| Formato: |
20
application/pdf
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