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Title: Numerical solutions of weather derivatives and other incomplete market problems
Author: Broni-Mensah, Edwin
ISNI:       0000 0004 2720 4732
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2012
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The valuation of weather derivatives is complex since the underlying temperature process has no negotiable price. This thesis introduces a selection of models for the valuation of weather derivative contracts, governed by a stochastic underlying temperature process. We then present a new weather pricing model, which is used to determine the fair hedging price of a weather derivative under the assumptions of mean self-financing. This model is then extended to incorporate a compensation (or market price of risk) awarded to investors who hold undiversifiable risks. This results in the derivation of a non-linear two-dimensional PDE, for which the numerical evaluation cannot be performed using standard finite-difference techniques. The numerical techniques applied in this thesis are based on a broad range of lattice based schemes, including enhancements to finite-differences, quadrature methods and binomial trees. Furthermore simulations of temperature processes are undertaken that involves the development of Monte Carlo based methods.
Supervisor: Duck, Peter Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: weather derivatives ; financial mathematics ; computational finance ; numerical methods