Department of Mathematics and Statistics at the Faculty of Science
University of Calgary
Analysis of Temperature Derivatives (Ch 10)
Submitted by jlongwor on Thu, 03/04/2010 - 3:02pm.
Mar 11 2010 - 12:20pm
Mar 11 2010 - 1:00pm
Speaker:
Anatoliy Swischuk
Location:
MS 325'Analysis of Temperature Derivatives' (Chapter 10, sections 10.1-10.3) (Book Review: 'Stochastic Modelling of Electricity and Related Markets' by F. Benth, J. Benth and S. Koekebakker, 2008, World Sci.)
The Chapter 10 is devoted to the market for temperature futures. We present continuous-time mean reversion models being generalizations of autoregressive moving average time series. Applying these to temperature data, we find that the 'volatility' of temperature has a clear seasonal pattern. The temperature models allow for rather explicit pricing of the typical futures traded on CME. The chapter includes a thorough empirical analysis of Stockholm temperature data in view of the proposed models.