S13 Quantifying the Relationship between Weather Forecast and Derivative Pricing

Sunday, 12 January 2020
Jade Chi-Mei Liu, Millersville Univ., Millersville, PA; and S. Ngu

Settlement prices of weather derivatives are based on forecasts. This project aims to look at the actual weather and compare that to the settlement prices. Taking into account different forecasting models and the price of contracts, a new model can be proposed based not only on the forecasts but also the pricing of the contracts. A selection of historical weather forecasts data in comparison with the past weather derivatives will be used for analysis. The study will be focusing on the six cities listed on Chicago Merchandise Exchange: Atlanta, Chicago, Cincinnati, Dallas, Minneapolis, and New York City.
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