The authors wish to thank the editors and the anonymous referees for their helpful comments on this article.
Weather Derivatives and Weather Risk Management
Version of Record online: 21 APR 2005
Risk Management and Insurance Review
Volume 8, Issue 1, pages 127–140, March 2005
How to Cite
Brockett, P. L., Wang, M. and Yang, C. (2005), Weather Derivatives and Weather Risk Management. Risk Management and Insurance Review, 8: 127–140. doi: 10.1111/j.1540-6296.2005.00052.x
- Issue online: 21 APR 2005
- Version of Record online: 21 APR 2005
Weather derivatives are a relatively recent kind of financial product developed to manage weather risks, and currently the weather derivatives market is the fastest-growing derivative market. The development of weather derivatives represents one of the recent trends toward the convergence of insurance and finance. This article presents an overview of weather risks, weather derivatives, and the weather derivatives market, and examines the valuation of weather derivatives in an incomplete market, the hedging effectiveness of standardized weather derivatives, as well as optimal weather hedging with the consideration of basis risk and credit risk.