A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives

Stochastic processes are employed in this paper to capture the evolution of daily mean temperatures, with the goal of pricing temperature-based weather options. A stochastic harmonic oscillator model is proposed for the temperature dynamics and results of numerical simulations and parameter estimati...

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Autores principales:	Alessio Giorgini, Rogemar S. Mamon, Marianito R. Rodrigo
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	weather derivatives stochastic models temperature harmonic oscillator parameter estimation Mathematics QA1-939
Acceso en línea:	https://doaj.org/article/f7403f2853bf444ba3c2f96fb46ae694
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spelling	oai:doaj.org-article:f7403f2853bf444ba3c2f96fb46ae6942021-11-25T18:16:54ZA Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives10.3390/math92228902227-7390https://doaj.org/article/f7403f2853bf444ba3c2f96fb46ae6942021-11-01T00:00:00Zhttps://www.mdpi.com/2227-7390/9/22/2890https://doaj.org/toc/2227-7390Stochastic processes are employed in this paper to capture the evolution of daily mean temperatures, with the goal of pricing temperature-based weather options. A stochastic harmonic oscillator model is proposed for the temperature dynamics and results of numerical simulations and parameter estimation are presented. The temperature model is used to price a one-month call option and a sensitivity analysis is undertaken to examine how call option prices are affected when the model parameters are varied.Alessio GiorginiRogemar S. MamonMarianito R. RodrigoMDPI AGarticleweather derivativesstochastic modelstemperatureharmonic oscillatorparameter estimationMathematicsQA1-939ENMathematics, Vol 9, Iss 2890, p 2890 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	weather derivatives stochastic models temperature harmonic oscillator parameter estimation Mathematics QA1-939
spellingShingle	weather derivatives stochastic models temperature harmonic oscillator parameter estimation Mathematics QA1-939 Alessio Giorgini Rogemar S. Mamon Marianito R. Rodrigo A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives
description	Stochastic processes are employed in this paper to capture the evolution of daily mean temperatures, with the goal of pricing temperature-based weather options. A stochastic harmonic oscillator model is proposed for the temperature dynamics and results of numerical simulations and parameter estimation are presented. The temperature model is used to price a one-month call option and a sensitivity analysis is undertaken to examine how call option prices are affected when the model parameters are varied.
format	article
author	Alessio Giorgini Rogemar S. Mamon Marianito R. Rodrigo
author_facet	Alessio Giorgini Rogemar S. Mamon Marianito R. Rodrigo
author_sort	Alessio Giorgini
title	A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives
title_short	A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives
title_full	A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives
title_fullStr	A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives
title_full_unstemmed	A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives
title_sort	stochastic harmonic oscillator temperature model for the valuation of weather derivatives
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/f7403f2853bf444ba3c2f96fb46ae694
work_keys_str_mv	AT alessiogiorgini astochasticharmonicoscillatortemperaturemodelforthevaluationofweatherderivatives AT rogemarsmamon astochasticharmonicoscillatortemperaturemodelforthevaluationofweatherderivatives AT marianitorrodrigo astochasticharmonicoscillatortemperaturemodelforthevaluationofweatherderivatives AT alessiogiorgini stochasticharmonicoscillatortemperaturemodelforthevaluationofweatherderivatives AT rogemarsmamon stochasticharmonicoscillatortemperaturemodelforthevaluationofweatherderivatives AT marianitorrodrigo stochasticharmonicoscillatortemperaturemodelforthevaluationofweatherderivatives
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A Stochastic Harmonic Oscillator Temperature Model for the Valuation of Weather Derivatives

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