Article
Climate risk management: The case of forecasting tropical cyclones
Research Collection Lee Kong Chian School Of Business
Publication Type
Working Paper
Version
publishedVersion
Publication Date
3-2010
Abstract
Global warming has induced an increasing number of deadly tropical cyclones with a continuing trend. Developing high-functional climate risk management tools in forecasting, catastrophe modeling, pricing and hedging is thus crucial. By using transactional price changes of traded hurricane derivatives as the predictor in a doubly-binomial pricing framework, we develop a dynamic market-consensus hurricane forecasting model. Our model can forecast when and how a hurricane will make landfall, and how these forecasts will update themselves upon trading arrival.
Keywords
- Tropical cyclones,
- Climate risk management,
- Forecasting,
- Doubly-binomial Tree,
- Stochastic intensity arrival,
- Random time steps,
- Option pricing
Discipline
Identifier
10.2139/ssrn.1570625
Publisher
SSRN
Creative Commons License
Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International
Additional URL
https://doi.org/10.2139/ssrn.1570625
Citation Information
Carolyn W CHANG, SK Jack CHANG and Kian Guan LIM. "Climate risk management: The case of forecasting tropical cyclones" (2010) Available at: http://works.bepress.com/kianguan-lim/31/