The optimisation of production plans is an important topic in agriculture, often related to diversification and specialisation as the classical instruments of coping with production risk. Although the measurement of embedded risk is often inaccurate, it is nevertheless necessary for decision...

Weather derivatives have become very popular tools in weather risk management in recent years. One of the elements supporting their diffusion has been the increase in volatility observed on many energy markets. Among the several available contracts, Quanto options are now becoming very popular...

Since the underlying of the weather derivatives is not a traded asset, these contracts cannot be evaluated by the traditional financial theory. Cao and Wei [2004. Weather derivatives valuation and market price of weather risk. The Journal of Futures Markets 24, no. 11: 1065-89] price them by...

In the absence of a market for weather derivatives in India, the paper discusses a hypothetical market, and how a contract could be structured when weather derivative trading is introduced. A survey was conducted in six villages in two districts in the state of Rajasthan in order to assess the...

We consider a manufacturer-retailer supply chain for a seasonal product whose demand is weather sensitive. The retailer orders from the manufacturer (supplier) prior to the selling season and then sells to the market. We examine how a manufacturer can structure a weather-linked rebate to improve...

In recent years , weather derivatives have become a common tool in risk management for many sectors. This has its roots in that there is no unique way to determine de value and price solutions that would be generally approved by market-participants, like in the case of the Black-Scholes formula...

Purpose – The purpose of this research is to study the weather risk management practices of agriculture producers. In particular, the authors look at the extent to which farmers use weather derivatives to complement insurance. Unlike insurance, weather derivatives mitigate risk associated with...

Purpose – The purpose of this paper is to model and to value a temperature derivative to hedge late frost risk in viticulture. Design/methodology/approach – Starting from 11 years of historical temperature data collected in Mendoza, Argentina, the authors reconstruct the missing data using...

This article reviews six different temperature forecasting models proposed by prior literature for pricing weather derivatives. Simulation of these models is used to estimate daily temperature and, as a consequence, the metrics used for pricing temperature derivatives. The models that rely on an...

A comparison of regime-switching approaches to modeling the stochastic behavior of temperature with an aim to the valuation of temperature-based weather options is presented. Four models are developed. Three of these are two-state Markov regime-switching models and the other is a single-regime...