Advances in Risk Management

CHAPTER 8 The Modeling of Weather Derivative Portfolio Risk Stephen Jewson 8.1 INTRODUCTION The companies that trade weather der ...

STEPHEN JEWSON 157 look beyond these basic methods and discuss a number of more complex issues: how simulations should be set up ...

158 THE MODELING OF WEATHER DERIVATIVE PORTFOLIO RISK £5,500,000. Thisroughlybalancesthemoneytheyloseontheirgassupplybusiness. I ...

STEPHEN JEWSON 159 The companies that sell weather derivatives to corporate hedgers like ABC gas company in our example are typi ...

160 THE MODELING OF WEATHER DERIVATIVE PORTFOLIO RISK it considers the outcome of contracts at expiry. Then in section 8.12 we b ...

STEPHEN JEWSON 161 be tempted to fit a distribution to the historical payoffs of the portfolio, and use the fitted distribution ...

162 THE MODELING OF WEATHER DERIVATIVE PORTFOLIO RISK We will refer to this basic method as the BMVN (Basic MultiVariate Normal) ...

STEPHEN JEWSON 163 much simpler estimate such as a correlation matrix based on independence. A non-parametric approach to implem ...

164 THE MODELING OF WEATHER DERIVATIVE PORTFOLIO RISK one could transform to any other multivariate distribution, such as a mult ...

STEPHEN JEWSON 165 8.9 INCORPORATING HEDGING CONSTRAINTS Obvious constraints between the payoffs of contracts within a weather d ...

166 THE MODELING OF WEATHER DERIVATIVE PORTFOLIO RISK This particular issue highlights that there is no single best solution for ...

STEPHEN JEWSON 167 pricing of stand-alone contracts (instead of closed-form expressions, which are faster and more accurate), an ...

168 THE MODELING OF WEATHER DERIVATIVE PORTFOLIO RISK marketvalue of a portfolio of weather derivatives, one has to consider mod ...

STEPHEN JEWSON 169 Cao, M. and Wei, J. (2000) “Pricing the Weather”,Risk, 13(5): 67–70. Dischel, R. (1998) “Black-Scholes Won’t ...

CHAPTER 9 Optimal Investment with Inflation-Linked Products Taras Beletski and Ralf Korn∗ 9.1 INTRODUCTION With the growing numb ...

TARAS BELETSKI AND RALF KORN 171 and the money market account will be set up and solved in section 9.3. Finally, in section 9.4 ...

172 OPTIMAL INVESTMENT WITH INFLATION-LINKED PRODUCTS nominal and the real interest rate we can produce models of different com- ...

TARAS BELETSKI AND RALF KORN 173 Ci(before adjustment to the inflation) at timestiis given by: BIL(t,I(t))= ∑n i= 1 Ci I(t) I(t ...

174 OPTIMAL INVESTMENT WITH INFLATION-LINKED PRODUCTS Of, course to use it we first have to set up the relevant optimization pro ...

TARAS BELETSKI AND RALF KORN 175 with Xφ(t)=φ 0 (t)P 0 (t)+φ 1 (t)f(1)(t,P 1 (t),I(t)) +φ 2 (t)f(2)(t,P 1 (t),I(t)) (9.13) (and ...