Related papers: Pricing Weather Derivatives for Extreme Events
This article presents methods for estimating extreme probabilities, beyond the range of the observations. These methods are model-free and applicable to almost any sample size. They are grounded in order statistics theory and have a wide…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. Demand and supply are balanced on a knife-edge because electric power cannot be economically stored, end user demand is…
The frequency of disruptive and newly emerging threats (e.g. man-made attacks--cyber and physical attacks; extreme natural events--hurricanes, earthquakes, and floods) has escalated dramatically in the last decade. Impacts of these events…
We price weather-contingent options by use of Monte Carlo simulations. After calibrating the models to fit quoted prices, we analyze bid-ask spreads in terms of correlations across markets. Results are presented for a double-trigger Weather…
When considering d possibly dependent random variables, one is often interested in extreme risk regions, with very small probability p. We consider risk regions of the form ${\mathbf{z}\in\mathbb{R}^d:f(\mathbf{z})\leq\beta}$, where f is…
Max-stable processes are natural models for spatial extremes because they provide suitable asymptotic approximations to the distribution of maxima of random fields. In the recent past, several parametric families of stationary max-stable…
Extreme precipitation events with large spatial extents may have more severe impacts than localized events as they can lead to widespread flooding. It is debated how climate change may affect the spatial extent of precipitation extremes,…
Quantifying uncertainty in weather forecasts is critical, especially for predicting extreme weather events. This is typically accomplished with ensemble prediction systems, which consist of many perturbed numerical weather simulations, or…
Climate models robustly imply that some significant change in precipitation patterns will occur. Models consistently project that the intensity of individual precipitation events increases by approximately 6-7%/K, following the increase in…
We present a new approach for the pricing of interest rate derivatives which allows a direct computation of option premiums without deriving a (Black-Scholes type) partial differential equation and without explicitly solving the stochastic…
We investigate extreme value theory for physical systems with a global conservation law which describe renewal processes, mass transport models and long-range interacting spin models. As shown previously, a special feature is that the…
In this article, we combine replication pricing with expectation pricing for derivative trades that are partially collateralized by cash. The derivatives are replicated by underlying assets and cash, using repurchasing agreement (repo) and…
Adaptation-relevant predictions of climate change are often derived by combining climate model simulations in a multi-model ensemble. Model evaluation methods used in performance-based ensemble weighting schemes have limitations in the…
Extreme events, exacerbated by climate change, pose significant risks to the energy system and its consumers. However there are natural limits to the degree of protection that can be delivered from a centralised market architecture.…
One measurement modality for rainfall is a fixed location rain gauge. However, extreme rainfall, flooding, and other climate extremes often occur at larger spatial scales and affect more than one location in a community. For example, in…
We propose and compare methods for the analysis of extreme events in complex systems governed by PDEs that involve random parameters, in situations where we are interested in quantifying the probability that a scalar function of the…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
Precipitation exceedance probabilities are widely used in engineering design, risk assessment, and floodplain management. While common approaches like NOAA Atlas 14 assume that extreme precipitation characteristics are stationary over time,…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
Models for extreme values accommodating non-stationarity have been amply studied and evaluated from a parametric perspective. Whilst these models are flexible, in the sense that many parametrizations can be explored, they assume an…