Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258071 
Year of Publication: 
2020
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 8 [Issue:] 4 [Article No.:] 118 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-23
Publisher: 
MDPI, Basel
Abstract: 
This paper focuses on weather derivatives as efficient risk management instruments and proposes a more advanced approach for their pricing. An "hybrid" contract is introduced, combining insurance properties, specifically tailored for the region under study and introducing Value-at-Risk (VaR) and Expected Shortfall (ES) as appropriate measures for the strike price. The numerical results show that VaR and ES are both efficient ways for managing the so-called Tail Risk; further, being ES more conservative than VaR and due to its subadditivity property, it can be seen that seasonal contracts are generally better off than monthly contracts in reducing global risk.
Subjects: 
climate change
temperature
risk hedging
Value-at-Risk
Expected Shortfall
portfolio diversification
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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