TY - JOUR T1 - Precipitation Modeling and Contract Valuation JF - The Journal of Alternative Investments SP - 93 LP - 99 DO - 10.3905/jai.2004.439656 VL - 7 IS - 2 AU - Melanie Cao AU - Anlong Li AU - Jason Z Wei Y1 - 2004/09/30 UR - https://pm-research.com/content/7/2/93.abstract N2 - This article has two objectives. First, it describes the market for precipitation derivatives and provides examples of applications of such contracts. Second, it proposes, estimates, and compares several models for precipitation. Based on the data for Chicago Midway Airport (1950–2003), we find that a mixture of exponentials and kernel density provide a better fit than a gamma distribution. A valuation example is also presented. ER -