RT Journal Article
SR Electronic
T1 Precipitation Modeling and Contract Valuation
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 93
OP 99
DO 10.3905/jai.2004.439656
VO 7
IS 2
A1 Melanie Cao
A1 Anlong Li
A1 Jason Z Wei
YR 2004
UL https://pm-research.com/content/7/2/93.abstract
AB 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.