In this paper we price a precipitation option based on empirical weather data from Germany using different pricing methods, among them Burn Analysis, Index Value Simulation and Daily Simulation. For that purpose we develop a daily precipitation model. Moreover, a decorrelation analysis is...

Index-based weather insurances are innovative tools for mitigating weather risks in agriculture.Several donor agencies and development organisations are investing substantially topropagate these programmes in developing countries. However, often due to high basis risks,these products mitigate...

In this paper we price a precipitation option based on empirical weather data from Germany using different pricing methods, among them the burn analysis, index value simulation and daily simulation. For that purpose we develop a daily precipitation model. Moreover, a decorrelation analysis is...

Basis risk has been cited as a primary concern for implementing weather hedges. This studyinvestigates several dimensions of weather basis risk for the U.S. corn market at variouslevels of aggregation. The results suggest that while the degree of geographic basis risk maybe significant in some...

The aim of this paper is to point out some problems of index estimation for the purposes of weather derivative valuation considering the particularities of agriculture. The assessment of the sensitivity of barley to weather over 40 years has been the basis for the design and valuation of weather...

In the macroeconomic literature, the implications of a context with household heterogeneity and incomplete financial markets have been mostly studied under the assumption that households own the physical capital and undertake the intertemporal investment decision. Further, firms rent capital and...

Many recent papers in macroeconomics have studied the implications of models with household heterogeneity and incomplete financial markets under the assumption that households own the stock of physical capital and undertake the intertemporal investment decisions. In these models, production...

Recent developments in intertemporal asset pricing theory focus on two sets of fundamental determinants of asset returns. Models with complete markets emphasize aggregate variables such as per capita consumption. Such models have not performed well empirically. Models with incomplete markets...

We document widespread violations of stochastic dominance by one-month S&P 500 index call options market over 1986-2006. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect by...

An economy faces an unknown individual risk, such as the health effects of a recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation....