Skip to main content

Wind Derivatives: Modeling and Pricing

Alexandridis, Antonis, Zapranis, Achilleas (2013) Wind Derivatives: Modeling and Pricing. Computational Economics, 41 (3). pp. 299-326. ISSN 0927-7099. (doi:10.1007/s10614-012-9350-y) (KAR id:32017)

PDF Author's Accepted Manuscript
Language: English
Download (535kB) Preview
[thumbnail of 2013-Computational Economics - pre.pdf]
Preview
This file may not be suitable for users of assistive technology.
Request an accessible format
Official URL
http://dx.doi.org/10.1007/s10614-012-9350-y

Abstract

Wind is considered to be a free, renewable and environmentally friendly

source of energy. However, wind farms are exposed to excessive weather risk since the

power production depends on the wind speed, the wind direction and the wind duration. This risk can be successfully hedged using a ?nancial instrument called weather

derivatives. In this study the dynamics of the wind generating process are modeled

using a non-parametric non-linear wavelet network. Our model is validated in New

York. The proposed methodology is compared against alternative methods, proposed

in prior studies. Our results indicate that wavelet networks can model the wind process very well and consequently they constitute an accurate and ef?cient tool for wind

derivatives pricing. Finally, we provide the pricing equations for wind futures written

on two indices, the cumulative average wind speed index and the Nordix wind speed

index.

Item Type: Article
DOI/Identification number: 10.1007/s10614-012-9350-y
Uncontrolled keywords: Wind derivatives; Weather derivatives; Pricing; Forecasting; Wavelet networks
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Division of Computing, Engineering and Mathematical Sciences > School of Mathematics, Statistics and Actuarial Science
Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Antonis Alexandridis
Date Deposited: 29 Oct 2012 13:36 UTC
Last Modified: 16 Nov 2021 10:09 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/32017 (The current URI for this page, for reference purposes)
  • Depositors only (login required):