Pricing and hedging of Taiwan precipitation option

碩士 === 國立交通大學 === 財務金融研究所 === 99 ===   Due to the special geographical and geological conditions, Taiwan has been threatened for years by typhoon, earthquake, debris flow and landslide. Recently, extreme climate events due to global warming has increased the frequency and intensity of those natural...

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Bibliographic Details
Main Author: 林青瑩
Other Authors: 王克陸
Format: Others
Language:zh-TW
Published: 2011
Online Access:http://ndltd.ncl.edu.tw/handle/44912779210074714687
Description
Summary:碩士 === 國立交通大學 === 財務金融研究所 === 99 ===   Due to the special geographical and geological conditions, Taiwan has been threatened for years by typhoon, earthquake, debris flow and landslide. Recently, extreme climate events due to global warming has increased the frequency and intensity of those natural catastrophes which cause more damages than before in Taiwan. As precipitation is the most important factor which causes most of the damages, this study attempts to develop the precipitation option which can be used by individuals and/or enterprises to hedge the rainfall risk.   Using historical precipitation data (2002~ 2010) of 10 observation stations from Central Weather Bureau, we simulate the monthly rainfall distribution with Neyman-Scott Rectangular Pulses Model in which storm arrives following Poisson distribution. Parameters are estimated with 1-hour and 24-hour cumulative historical precipitation data. The precipitation model is built and we apply Monte Carlo method to simulate the path of the precipitation. To demonstrate the use of precipitation option in rainfall risk hedging, Typhoon Morakot (2009) is analyzed as an example.