This article presents a general method for pricing weather derivatives. Specification tests find that a temperature series for Fresno, CA follows a mean-reverting Brownian motion process with discrete jumps and autoregressive conditional heteroscedastic errors. Based on this process, we define...

The traditional necessary condition for futures market inefficiency is the existence of alternative forecasting methods that produce mean squared forecast errors smaller than the futures market. Here, a more exacting requirement for futures market efficiency is proposed-forecast encompassing....

The traditional necessary condition for futures market inefficiency is the existence of alternative forecasting methods that produce mean squared forecast errors smaller than the futures market. Here, a more exacting requirement for futures market efficiency is proposed—forecast encompassing....

This article presents a general method for pricing weather derivatives. Specification tests find that a temperature series for Fresno, CA follows a mean-reverting Brownian motion process with discrete jumps and autoregressive conditional heteroscedastic errors. Based on this process, we define...