On the temperature derivative market, modeling temperature volatility is an important issue for pricing and hedging. In … order to apply pricing tools of financial mathematics, one needs to isolate a Gaussian risk factor. A conventional model for … Gaussian variable appears. Earlier work investigated this temperature risk in dfferent locations and showed that neither …

of the risk neutral density. The first estimator is a kernel smoother of the second derivative of call prices, while the …This chapter deals with nonparametric estimation of the risk neutral density. We present three different approaches … we assume the existence of a stochastic discount factor (pricing kernel) which establishes the risk neutral density …

known as volatility smile. They provide a discrete approximation to the continuous risk neutral process for the underlying …

This chapter deals with the estimation of risk neutral distributions for pricing index options resulting from the … hypothesis of the risk neutral valuation principle. After justifying this hypothesis, we shall focus on parametric estimation … methods for the risk neutral density functions determining the risk neutral distributions. We we shall differentiate between …

weather derivative market does not exist. The findings support theoretical results of reverse relation between MPR and …Weather derivatives (WD) are different from most financial derivatives because the underlying weather cannot be traded … and therefore cannot be replicated by other financial instruments. The market price of risk (MPR) is an important …

Forecasting based pricing of Weather Derivatives (WDs) is a new approach in valuation of contingent claims on … nontradable underlyings. Standard techniques are based on historical weather data. Forward-looking information such as … meteorological forecasts or the implied market price of risk (MPR) are often not incorporated. We adopt a risk neutral approach (for …

. The local effects of temperature risk support the existence of global warming. …

Life insurers typically grant policyholders a surrender option. We demonstrate that the resulting lapse risk could …

We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from … structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum … likelihood approach, we find for Kazakhstan that the overall crisis probability was mainly driven by short-term risk, which …