Utility-based Pricing of the Weather Derivatives

  title={Utility-based Pricing of the Weather Derivatives},
  author={H{\'e}l{\`e}ne Hamisultane},
  • Hélène Hamisultane
  • Published 2018
Since the underlying of the weather derivatives is not a traded asset, these contracts cannot be evaluated by the traditional financial theory. Cao and Wei (2004) price them by using the consumption-based asset pricing model of Lucas (1978) and by assuming different values for the constant relative risk aversion coefficient. Instead of taking this coefficient as given, we suggest in this paper to estimate it by using the consumption data and the quotations of one of the most transacted weather… CONTINUE READING

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