It is a matter of common knowledge that weather represents the major source of uncertainty in crop production. It is to be expected that weather fluctuations will increase in the future due to climate change. Traditionally, farmers tried to protect themselves against weather-related yield...

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...

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...

Replaced with revised version of paper 06/17/08.

Replaced with revised version of paper 06/17/08.

In this article 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 de-correlation analysis is...

Weather derivatives are difficult to price due to the nontradability of weather and the absence of liquid secondary markets for these contracts. We use the concept of indifference pricing to develop a model for calculating the willingness to pay for weather insurance. Compared with other...

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...

This study examines rainfall variability and its implications for wheat production risk in northeast Germany. The hedging effectiveness of rainfall options and the role of geographical basis risk are analyzed using a daily precipitation model. Simpler pricing methods such as the burn analysis...

This article develops an Indifference Pricing model for a weather derivative that is traded over the counter. The model is used to calculate ask and bid prices for a put option on a weather index in Germany. We find that under moderate risk aversion the maximal bid prices of grain producers...