• Journal of the Korean Data and Information Science Society
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• v.23 no.2
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• pp.365-374
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• 2012

Weather derivatives designed to manage casual changes of weather, as opposed to catastrophic risks of weather, are relatively a new class of financial instruments. There are still many theoretical and practical challenges to the effective use of these instruments. The objective of this paper is to develop a pricing approach for valuing weather derivatives and presents a case study that is practical enough to be used by the risk managers of electrical utility firms. Utilizing daily average temperature data of Guangzhou, China from $1^{st}$ January 1978 to $31^{st}$ December 2010, this paper adopted a univariate time series model to describe weather behavior dynamics and calculates equilibrium prices for weather futures and options for an electrical utility firm in the region. The results imply that the risk premium is an important part of derivatives prices and the market price of risk affects option values much more than forward prices. It also demonstrates that weather innovation as well as weather risk management significantly affect the utility's financial outcomes.

• Korean Journal of Organic Agriculture
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• v.28 no.4
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• pp.459-475
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• 2020

This study analyzes weather derivatives as an alternative risk management tool to stabilize farm revenue to complement the existing crop insurance program which suffers from asymmetric information problems such as adverse selection, moral hazard, and verifiability. We estimated apple yield functions to observe the relationship between yields and weather indices such as temperature and precipitation. Based on the estimated yield functions we designed weather futures and options products underlying temperature and precipitation, and calculated the prices of futures and options by two different approaches, historical distribution and Monte Carlo simulation. We found that weather futures and options stabilize farm revenue based on the estimated four risk indicators: Coefficient of Variation, Value at Risk, Certainty Equivalence, and Risk Premium. As a result, weather derivatives could be considered as a potential farm risk management tool through studying more in legal and institutional strategies and developing various derivatives products.

• Journal of applied mathematics & informatics
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• v.9 no.2
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• pp.771-785
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• 2002

Many industries like energy, utilities, ice cream and leisure sports are closely related to the weather. In order to hedge weather related risks, they invest their assets with portfolios like option, coupons, future, and other weather derivatives. Among weather related derivatives, CDD and HDD index options are mainly transacted between companies. In this paper, the autocorrelation system of temperature will be checked for several cities in Korea and the parameter estimation will be carried based on the maximum likelihood estimation. Since the log likelihood increase as the number of parameters increases, we adopt the Schwarz information criterion .

• Journal of applied mathematics & informatics
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• v.12 no.1_2
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• pp.335-349
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• 2003

Almost all business are affected by the weather so that weather derivatives has been traded to hedge weather risk. Since the weather itself is not an asset with a market price, some analysts believe that the Black-Scholes equation could not be used appropriately to price weather derivative options. But some weather derivatives can be considered as an Asian option, we revisit the Black-scholes model. Numerical solution of the Black-Scholes equation has a significant error at the money option or around the money option, it is necessary to adopt adaptive mesh near to the strike value. Here we propose a numerical method with an adaptive grid refinement.

• Environmental and Resource Economics Review
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• v.15 no.2
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• pp.319-353
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• 2006

This paper shows how weather derivatives can be used to hedge against the price risk and volume risk of purchasing relatively large amounts of electricity. Our specific approach to designing new contracts for electricity is to focus on the return over a summer season rather than on the daily levels of demand and price. It is shown that correct market signals can be preserved in a contract and the associated financial risk can be offset by weather options. The advantage of combining a forward contract with a weather derivative is that the high prices on hot days or when the temperature is high reflect the underlying high cost of producing power when the load is high and that the combined contract with a weather derivative substantially reduces the volatility of the return.

• Proceedings of the Korea Society of Environmental Toocicology Conference
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• 2004.11a
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• pp.105-105
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• 2004

• Journal of the Korean Data and Information Science Society
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• v.25 no.1
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• pp.155-167
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• 2014

This study uses a continuous autoregressive (CAR) model to analyze daily average temperature in six Korean metropolitan cities. Data period is Jan. 1, 1954 to Dec. 31, 2010 covering 57 years. Using a relative long time series reveals that the linear time trend components are all statistically significant in the six cities, which was not shown in previous studies. Particularly the plus sign of its coefficient implies the effect on Korea of the global warming. Unit-root test results are that the temperature time series are stationary without unit-root. It turns out that CAR(3) is suitable for stochastic component of the daily temperature. Since developing suitable continuous stochastic model of the underlying weather related variables is crucial in pricing the weather derivatives, the results in this study will likely prove useful in further future studies on pricing weather derivatives.

• Agribusiness and Information Management
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• v.4 no.1
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• pp.24-31
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• 2012

This case study investigates the KIKO currency option that has been a social issue in recent years among developing countries, especially Korea, where the financial derivatives market is in a state of rapid growth. The forward transaction which becomes a basis of derivatives is intended to hedge risks that may be caused by a future change in asset prices. Although it originates from a simple form of agricultural transactions, there currently exists a variety of derivatives in more sophisticated forms. In the Korean agricultural industry, the need to use such derivatives is great, as there is a huge risk of price fluctuation in agricultural products due to frequent adverse weather. In addition, many developing countries with export-led industrial structures similar to Korea's, of necessity must resort to currency hedging as a method of reducing relevant risk. However, in most cases, the lack of understanding about financial derivatives results in an inappropriate application of these derivatives. The KIKO in this study represents such cases. Since 2007, KIKO has been sold in Korea to many small- and medium-sized export companies for the purpose of currency hedging when the exchange rate between the Korean won and the U.S. dollar was in a downward spiral. The main focus of this study is a case which is most representative of KIKO. As inflation rapidly increased during the financial crisis in the U.S. at the end of 2007, derivatives became a hot issue in the courts rather than in the financial markets. This case study investigates what KIKO and the fierce legal debates over it imply, from the perspective of the option of value evaluation in order to suggest not only a direction in which companies can utilize financial derivatives, but also a roadmap for the future derivatives market.

• Korean Journal of Agricultural and Forest Meteorology
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• v.17 no.4
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• pp.290-305
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• 2015

To improve the practicality of 'Early warning service about agrometeorological weather hazards' and operation efficiency to deliver site-specific about a lot of land unit possibility of weather hazard occurrence with the suitable counterplan to farmer, site-specific early warning service system that was built at the National Academy of Agricultural Science in Korea passed some of the error supplementation and service's stabilization stage during operation period for trial services from October 2014 to March 2015. Field service system covered about 470 volunteered farmer and 950 lots in Seomjin river downstream areas (part of Gwangyang-si, Hadong-gun, Gurye-gun). This system (Two track system) consists of early warning system (a lot of land unit) to inform farmer by individual text message and dispersal prior alert system that can see the jurisdiction's situation of local government. Individual text message about Seomjin river downstream that is our first study area was launched since $2^{nd}$ March 2015, and online site (http://www.agmet.kr) started business since April 2015. Service offers currently information of farm weather, farm weather hazard, nationwide weather risk and special weather alert, also our system will consistently expand the service target area and contents and improve the service quality until 2017 when our study finished. To prevent crops damage that was caused by crisis situation like farm weather and weather damage offer prior alert about agrometeorological weather harzard to volunteered farmer, thereby our study expects to help the reduction of farm's damage caused by weather derivatives.

• Textile Coloration and Finishing
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• v.9 no.1
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• pp.44-49
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• 1997

Recent investigation and developments of A. Iqbal on diketo-pyrrolo-pyrrole (DPP) pigments has prompted us to synthesize and close observation of a few properties of these molecules. Described are synthesis, via 1-phenyl-2-ethoxycarbonyl-5-pyrrolinone intermediate, of asymmetric derivatives such as 1,4-Diketo-3-(4-chlorophenyl)-6-phenyl-pyrrolo-(3,4c)-pyrrole (4), 1,4-Diketo-3-(4-bromophenyl)-6-phenybpyrrolo-(3,4c)-pyrrole (5), 1,4-Diketo-3-(3-cyanophenyl)-6-phenyl-pyrrolo-(3,4c)-pyrrole (6), 1,4-Diketo-3-(4-cyanophenyl)-6-phenyl-pyrrolo-(3,4c)-pyrrole (7), 1,4-Diketo-3-(4-pyridyl)-6-phenyt-pyrrolo-(3,4c)-pyrrole (8), 1,4-Diketo-3-(3-pyridyl)-6-phenyl-pyrrolo-(3,4c)-pyrrole (9), 1,4-Diketo-3-(2-pyridyl)-6-phenyl-pyrrolo-(3,4c)-pyrrole (10), 1,4-Diketo-3-($\beta$-naphthyl)-6-phenyl-pyrrolo-(3,4c)-pyrrole (11), and UV-Vis absorption spectrum of the above compounds. Results from calculation of their absorption maxima using PISYSTEM are also described.