Valuation of climatic options: an application for the rice sector of Yopal (Colombia)

Juan Camilo Vargas Arayón, Nathalia Alejandra Ríos Castro

Resumen


This paper presents the weather derivatives pricing model developed by Alaton et al. (2002) and it proposes an application by use this model with Monte Carlo simulation technique (MC), with the goal of assessing a barrier option (such as weather option) for the rice sector on Yopal (Colombia) by involving critical temperature hresholds for cultivation. Thus, the temperature behavior (underlying) is modeled by the technique of mc assuming a stochastic process with a mean reversion of type Ornstein-Uhlenbeck. The results show that this type of hedging mechanisms becomes a feasible alternative with great potential for implementation.


Palabras clave


Stochastic processes, weather option, Monte Carlo simulation.

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DOI: https://doi.org/10.18601/17941113.n12.03

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Publicado: 2017-11-09 12:38:49



Copyright (c) 2017 Juan Camilo Vargas Arayón, Nathalia Alejandra Ríos Castro

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Este obra está bajo una licencia de Creative Commons Reconocimiento-NoComercial 4.0 Internacional.