The pricing of temperature futures at the Chicago Mercantile Exchange

URN to cite this document:: urn:nbn:de:bvb:355-epub-98169
DOI to cite this document:: 10.5283/epub.9816

Dorfleitner, Gregor ; Wimmer, Maximilian

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Date of publication of this fulltext: 04 Dec 2009 11:22

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Abstract

This paper analyzes observed prices of U.S. temperature futures at the Chicago Mercantile Exchange (CME). Results show that an index modeling approach without detrending captures the prices exceptionally well. Moreover, weather forecasts significantly influence prices up to 11 days ahead. It is shown that valuations of temperature futures relying on a model without detrending yield biased ...