Τιμολόγηση παραγώγων καιρού και εφαρμογές στην αγροτική οικονομία
Fair and actuarial pricing approaches to weather derivatives with an application in agricultural economy
In this paper a fair pricing model for weather derivatives is proposed. Standard hedging-based pricing methods cannot be applied since weather derivatives are traded in an incomplete market setting. The growth optimal portfolio, which is defined as a global stock index, is used as a reference point or value via all benchmarked derivative price processes can be compared. Payoffs of weather derivatives that are independent of the value of the growth optimal portfolio, it is revealed that the classical actuarial pricing methodology is a particular case of fair pricing concept. A model based on time data values is constructed to approach historical weather characteristics. For some particular weather derivatives, the fair price is obtained through historical and Gaussian residuals. Questions that are arised regarding weather risk is a diversifiable risk or not and its connection with the applications of weather derivatives are also discussed.