English, Article edition: Analysis of rainfall derivatives using daily precipitation models: opportunities and pitfalls Martin Odening; Oliver Musshoff; Wei Xu

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Bookmark: http://trove.nla.gov.au/version/22339
Physical Description
  • article
Language
  • English

Edition details

Title
  • Analysis of rainfall derivatives using daily precipitation models: opportunities and pitfalls
Author
  • Martin Odening
  • Oliver Musshoff
  • Wei Xu
Physical Description
  • article
Notes
  • This study examines rainfall variability and its implications for wheat production risk in northeast Germany. The hedging effectiveness of rainfall options and the role of geographical basis risk are analyzed using a daily precipitation model. Simpler pricing methods such as the burn analysis and the index value simulation serve as benchmarks for comparison. It is found that the choice of statistical approach may lead to considerable differences in the estimation results. Daily precipitation models should be used with some caution in the context of derivative 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.
  • Hedging effectiveness, Precipitation modeling, Weather derivatives
  • RePEc:eme:afrpps:v:67:y:2007:i:1:p:135-156
Language
  • English
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