Hedging of Spatial Temperature Risk with Market-Traded Futures

The main objective of this work is to construct optimal temperature futures from available market-traded contracts to hedge spatial risk. Temperature dynamics are modelled by a stochastic differential equation with spatial dependence. Optimal positions in market-traded futures minimizing the variance are calculated. Examples with numerical simulations based on a fast algorithm for the generation of random fields are presented.

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Year of publication:	2011
Authors:	Barth, Andrea ; Benth, Fred Espen ; Potthoff, Jurgen
Published in:	Applied Mathematical Finance. - Taylor & Francis Journals, ISSN 1350-486X. - Vol. 18.2011, 2, p. 93-117
Publisher:	Taylor & Francis Journals
Subject:	Temperature futures \| Hedging \| Spatio-temporal random fields \| Heating and cooling degree-days \| Stochastic simulation

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009279048