Modeling Temperature and Pricing Weather Derivatives Based on Temperature

Table 2

One-year-ahead prediction and error values for CDDs.

City	Actual	The current model	Years	Error (%)	Campbell	Error (%)	Benth	Error (%)	HBA	Error (%)
Ankara	426	742	5	74.18	175	−58.92	412	−3.29	417	−2.11
Beijing	1576	1542	19	−2.16	1214	−22.97	1647	4.51	1447	−8.19
Cairo	3221	4243	5	31.73	2763	−14.22	3427	6.40	3218	−0.09
Chicago	1071	771	7	−28.01	647	−39.59	866	−19.14	909	−15.13
Dallas	3585	2556	5	−28.70	2353	−34.37	2903	−19.02	2792	−22.12
Istanbul	1428	1297	5	−9.17	792	−44.54	1224	−14.29	1089	−23.74
LA	426	490	32	15.02	569	33.57	495	16.20	681	59.86
New York	1297	1104	7	−14.88	906	−30.15	988	−23.82	1046	−19.35
Paris	264	118	8	−55.30	63	−76.14	189	−28.41	314	18.94
Sydney	1308	1251	9	−4.36	840	−35.78	1206	−7.80	1157	−11.54
Tokyo	1832	1608	18	−12.23	1282	−30.02	1716	−6.33	434	−76.31
Washington	1927	1739	8	−9.76	1451	−24.70	1503	−22.00	1609	−16.50

Number of years of data included in estimation.