We develop an accurate valuation setup for freight options, featuring an exponential mean-reverting model for the freight rate with distinct reversion scales for its jump and diffusion components. We calibrate to Baltic option prices and analyze the freight rate dynamics. More specifically, we...

An accurate weather forecast is the basis for the valuation of weather derivatives, securities that partially compensate for financial losses to holders in case of, from their perspective, adverse outside temperature. The paper analyses precision of two forecast models of average daily...