Weather Derivatives and Weather Insurance: Concept, Application, and Analysis

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  • 1 Risk Analysis and Technologies, E. W. Blanch Company, Minneapolis, Minnesota
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The concept and applications of weather derivatives and weather insurance are introduced. Proper analysis of these financial instruments requires both statistical knowledge and thorough understanding of the physical weather and climate process. A simple but practical analysis approach is developed based on historical data and seasonal forecast. It is then applied to a single and a portfolio of weather derivative contracts. Business implications of the results from the analysis are discussed.

Corresponding author address: Lixin Zeng, E. W. Blanch Company, 3600 W. 80th St., Minneapolis, MN 55431. E-mail: lixin_zeng@ewb.com

The concept and applications of weather derivatives and weather insurance are introduced. Proper analysis of these financial instruments requires both statistical knowledge and thorough understanding of the physical weather and climate process. A simple but practical analysis approach is developed based on historical data and seasonal forecast. It is then applied to a single and a portfolio of weather derivative contracts. Business implications of the results from the analysis are discussed.

Corresponding author address: Lixin Zeng, E. W. Blanch Company, 3600 W. 80th St., Minneapolis, MN 55431. E-mail: lixin_zeng@ewb.com
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