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Temperature Forecasting in the Concept of Weather Derivatives: A Comparison between Wavelet Networks and Genetic Programing

Alexandridis, Antonis, Kampouridis, Michael (2013) Temperature Forecasting in the Concept of Weather Derivatives: A Comparison between Wavelet Networks and Genetic Programing. In: 13th Engineering Applications of Neural Networks, 13-16 September, 2013, Halkidiki, Greece.

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Abstract

The purpose of this study is to develop a model that accurately describes the dynamics of the daily average temperature in the context of weather derivatives pricing. More precisely we compare two state of the art algorithms, namely wavelet networks and genetic programming against the classic linear approaches widely using in the contexts of temperature derivative pricing. The accuracy of the valuation process depends on the accuracy of the temperature forecasts. Our proposed models were evaluated and compared in-sample and out-of-sample in various locations. Our findings suggest that the proposed nonlinear methods significantly outperform the alternative linear models and can be used for accurate weather derivative pricing.

Item Type: Conference or workshop item (Paper)
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Sciences > School of Mathematics Statistics and Actuarial Science > Actuarial Science
Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Antonis Alexandridis
Date Deposited: 05 Dec 2013 20:49 UTC
Last Modified: 29 May 2019 11:35 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/37248 (The current URI for this page, for reference purposes)
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