The Valuation of Temperature Derivatives: The Case for Taiwan

Abstract

本文著重於溫度風險及探討何種分配最能捕捉臺灣溫度之動態行為。我們採用Campbell與Diebold (2005)模型捕捉臺灣溫度之特性及探討在不同機率分配之影響。我們發現標準Gumbel分配在樣本內外皆提供良好的配適與預測能力。此外，我們延伸Cao與Wei (2004)之評價方法並求得HDD與CDD之價格。最後，我們發現在不同機率分配假設下其對溫度衍生性商品影響十分顯著。

This research focuses on the temperature risk and attempts to investigate which distribution is most appropriate for capturing the Taiwan`s temperature dynamics. We adopt the Campbell and Diebold (2005) model to describe the temperature characteristics and examine a variety of distributions. We find that the standard Gumbel distribution provides the best fit for both in-sample and out-of-sample performance. Further, we extend Cao and Wei`s (2004) approach to obtain the valuation framework for HDD and CDD contracts. Finally, we observe that the effects of different distributions on the value of the temperature derivatives are very significant.