A1 Vertaisarvioitu alkuperäisartikkeli tieteellisessä lehdessä
Hedging temperature risk with CDD and HDD temperature futures
Tekijät: Benth Fred Espen, Lempa Jukka
Kustantaja: WILEY
Julkaisuvuosi: 2023
Journal: Applied Stochastic Models in Business and Industry
Tietokannassa oleva lehden nimi: APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY
Lehden akronyymi: APPL STOCH MODEL BUS
Sivujen määrä: 14
ISSN: 1524-1904
eISSN: 1526-4025
DOI: https://doi.org/10.1002/asmb.2815
Verkko-osoite: https://doi.org/10.1002/asmb.2815
Rinnakkaistallenteen osoite: https://research.utu.fi/converis/portal/detail/Publication/180866756
This paper is concerned with managing risk exposure to temperature using weather derivatives. We consider hedging temperature risk using so-called HDD- and CDD-index futures, which are instruments written on temperatures in specific locations over specific time periods. The temperatures are modelled as continuous-time autoregressive (CARMA) processes and pricing of the hedging instrument is done under an equivalent pricing measure. We develop hedging strategies for locations, cutoff temperatures, and time periods different to the ones in the traded contracts, allowing for more flexibility in the hedging application. The dynamic hedging strategies are expressed explicitly by the term structure of the volatility. We also provide numerical case studies with temperatures following a CAR(3)-process to illustrate the temporal behaviour of the hedge under different scenarios.
Ladattava julkaisu This is an electronic reprint of the original article. |  |
