Peer group analysis for introducing weather derivatives for a city

Seok Jae Hong, So Young Sohn

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Due to changes in global climate, infrastructure damage caused by extreme weather has been increasing worldwide, and Korea also has not escaped such damage. Countries such as the United States, Japan, Canada and Australia have introduced weather insurance and derivatives in order to hedge potential risks of damage caused by climate change. Korea has also introduced weather insurance, but weather derivatives have not yet been introduced. In this paper, we do the research for introducing weather derivatives for Seoul, Korea. Weather derivatives need to reflect the climatic conditions of the region. In this paper, we apply a peer group analysis to introduce weather derivatives for Seoul, Korea, based on the climatic conditions of the region. In addition, we propose a simple pricing method for the weather derivative using both historical weather data of Seoul and its peer cities. Our study results can help other cities who want to introduce weather derivatives for them.

Original languageEnglish
Pages (from-to)5680-5687
Number of pages8
JournalExpert Systems with Applications
Volume40
Issue number14
DOIs
Publication statusPublished - 2013

All Science Journal Classification (ASJC) codes

  • Engineering(all)
  • Computer Science Applications
  • Artificial Intelligence

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