... independent variable is the difference in elevation between stations, explained by the fact that the primary temperature difference will be due to the elevation of the station. Rainfall correlation, however, is strongly dependent on distance as precipitation will often be an extremely localized phenomenon...

...‐order model is constructed and compared to a simple first‐order model to evaluate the importance of the model order for the pricing of a rainfall index put option. Design/methodology/approach For the first time a mixed‐order Markov chain model is presented where the monthly varying order was chosen...

... conditions that could allow the progress of the weather derivatives market in Portugal. Weather derivatives are important because weather conditions directly affect the output of recreation and tourism industries. For example, rainfall indices play a significant role in the success of open‐air events...