File Download

There are no files associated with this item.

  Links for fulltext
     (May Require Subscription)
Supplementary

Article: The effectiveness of using a basis hedging strategy to mitigate the financial consequences of weather-related risks

TitleThe effectiveness of using a basis hedging strategy to mitigate the financial consequences of weather-related risks
Authors
Issue Date2010
PublisherSociety of Actuaries. The Journal's web site is located at http://www.soa.org/ccm/content/?categoryID=767033
Citation
North American Actuarial Journal, 2010, v. 14 n. 2, p. 157-175 How to Cite?
AbstractThis paper examines the effectiveness of using a hedging strategy involving a basis derivative instrument to reduce the negative financial consequences of weather-related risks. We examine the effectiveness of using this basis derivative strategy for both summer and winter seasons, using both linear and nonlinear hedging instruments and the impacts of default risk and perception errors on weather hedging efficiency. We also compare the hedging effectiveness obtained using weather indices produced by both the Chicago Mercantile Exchange (CME) and Risk Management Solutions, Inc. (RMS). The results indicate that basis hedging is significantly more effective for the winter season than for the summer season, whether using the CME or RMS weather indices, and whether using linear or nonlinear derivative instruments. It is also found that the RMS regional weather indices are more effective than the CME weather indices, and the effectiveness of using either linear or nonlinear hedging instruments for weather risk management can vary significantly depending on the region of the country. In addition, the results indicate that default risk has some impact on nonlinear basis hedging efficiency but no impact on linear basis hedging efficiency, and reasonable perception errors on default risk have no impact on either linear or nonlinear basis hedging efficiency.
Persistent Identifierhttp://hdl.handle.net/10722/188463
ISSN
2015 SCImago Journal Rankings: 1.505
SSRN
References

 

DC FieldValueLanguage
dc.contributor.authorGolden, LLen_US
dc.contributor.authorYang, CCen_US
dc.contributor.authorZou, Hen_US
dc.date.accessioned2013-09-03T04:07:44Z-
dc.date.available2013-09-03T04:07:44Z-
dc.date.issued2010en_US
dc.identifier.citationNorth American Actuarial Journal, 2010, v. 14 n. 2, p. 157-175en_US
dc.identifier.issn1092-0277en_US
dc.identifier.urihttp://hdl.handle.net/10722/188463-
dc.description.abstractThis paper examines the effectiveness of using a hedging strategy involving a basis derivative instrument to reduce the negative financial consequences of weather-related risks. We examine the effectiveness of using this basis derivative strategy for both summer and winter seasons, using both linear and nonlinear hedging instruments and the impacts of default risk and perception errors on weather hedging efficiency. We also compare the hedging effectiveness obtained using weather indices produced by both the Chicago Mercantile Exchange (CME) and Risk Management Solutions, Inc. (RMS). The results indicate that basis hedging is significantly more effective for the winter season than for the summer season, whether using the CME or RMS weather indices, and whether using linear or nonlinear derivative instruments. It is also found that the RMS regional weather indices are more effective than the CME weather indices, and the effectiveness of using either linear or nonlinear hedging instruments for weather risk management can vary significantly depending on the region of the country. In addition, the results indicate that default risk has some impact on nonlinear basis hedging efficiency but no impact on linear basis hedging efficiency, and reasonable perception errors on default risk have no impact on either linear or nonlinear basis hedging efficiency.en_US
dc.languageengen_US
dc.publisherSociety of Actuaries. The Journal's web site is located at http://www.soa.org/ccm/content/?categoryID=767033en_US
dc.relation.ispartofNorth American Actuarial Journalen_US
dc.titleThe effectiveness of using a basis hedging strategy to mitigate the financial consequences of weather-related risksen_US
dc.typeArticleen_US
dc.identifier.emailZou, H: hongzou@hku.hken_US
dc.identifier.authorityZou, H=rp01800en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1080/10920277.2010.10597583-
dc.identifier.scopuseid_2-s2.0-77956576017en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-77956576017&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume14en_US
dc.identifier.issue2en_US
dc.identifier.spage157en_US
dc.identifier.epage175en_US
dc.publisher.placeUnited Statesen_US
dc.identifier.ssrn2330342-
dc.identifier.scopusauthoridGolden, LL=7005303387en_US
dc.identifier.scopusauthoridYang, CC=7407030266en_US
dc.identifier.scopusauthoridZou, H=48663306300en_US

Export via OAI-PMH Interface in XML Formats


OR


Export to Other Non-XML Formats