...Sergio Cabrales; Jesus Solano; Carlos Valencia; Rafael Bautista Purpose In the equatorial Pacific, rainfall is affected by global climate phenomena, such as El Niño Southern Oscillation (ENSO). However, current publicly available methodologies for valuing weather derivatives do not account...

...Niels Pelka; Oliver Musshoff Purpose The use of weather derivatives is impaired with a basis risk which diminishes the hedging effectiveness and hinders the distribution of these risk management instruments in the agricultural sector. A frequently suggested approach to reduce the basis risk...

...Nicholas Paulson; Saqib Khan; Morina Rennie; Sylvain Charlebois Purpose The purpose of this research is to study the weather risk management practices of agriculture producers. In particular, the authors look at the extent to which farmers use weather derivatives to complement insurance. Unlike...

... differs from the temperature of the area where the meteorological station is located, the payment of the derivative may not cover the losses incurred by the producer. Weather derivatives (WD) are financial contracts with payoffs that depend upon an underlying climatological event, such as temperature...

..., an integrated approach for a comprehensive assessment of weather derivatives and other hedging instruments is proposed that is based on the concept of portfolio optimization. © Emerald Group Publishing Limited 2008 Downside risk Portfolio optimization Risk management Risk‐value models Weather...

...Oliver Musshoff; Norbert Hirschauer; Martin Odening Since the mid‐1990s, agricultural economists have discussed the relevance of index‐based insurances, also called “weather derivatives”, as hedging instruments for volumetric risks in agriculture. Motivated by the question of how weather...

... costly if the risks are common, but the risk premiums on rare or low‐frequency weather risks can be very manageable. © Emerald Group Publishing Limited 2008 Prescription insurance Rainfall insurance Weather derivatives Weather insurance Weather‐linked bonds Weather‐linked mortgages ...

... aggregation in the risk exposure and hedging instrument increases. © Emerald Group Publishing Limited 2008 Basis risk Hedging effectiveness Spatial aggregation Weather derivatives ...

...Sommarat Chantarat; Calum G. Turvey; Andrew G. Mude; Christopher B. Barrett This paper illustrates how weather derivatives indexed to forecasts of famine can be designed and used by operational agencies and donors to facilitate timely and reliable financing, for effective emergency response...

... pricing because they tend to underestimate rainfall variability. This is unexpected, because daily simulation models are usually preferred in the context of temperature‐based weather indexes. © Emerald Group Publishing Limited 2007 Hedging effectiveness Precipitation modeling Weather...

...Calum G. Turvey This paper presents a model and framework for pricing degree‐day weather derivatives when the weather variable is a non‐traded asset. Using daily weather data from 1840S1996, it is shown that a degree‐day weather index exhibits stable volatility and satisfies the random walk...