Regime-Switching Temperature Dynamics Model for Weather Derivatives

<table class="fixed-width table-group" id="tab6"><tr><td><table class="table"><colgroup><col style="width:4.18em"/><col style="width:4.35em"/><col style="width:7.20em"/><col style="width:4.24em"/><col style="width:4.87em"/></colgroup><tr><td class="thead-hr" colspan="5"><hr/></td></tr><tr class="thead"><td class="align_left"> </td><td class="align_center"><span style="width: 15.3285ptpx;"><svg height="11.927pt" id="M184" style="vertical-align:-3.291101pt" version="1.1" viewbox="-0.0498162 -8.6359 15.3285 11.927" width="15.3285pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M686 28C612 35 607 44 591 112C563 234 541 360 519 489L489 666L457 658L147 121C100 40 89 36 24 28L17 0H240L250 28C168 34 159 41 190 101L262 237H482C495 180 503 137 510 91C517 47 514 35 441 28L433 0H677L686 28ZM475 280H285L429 541H431L475 280Z" id="g113-66"></path></g><g transform="matrix(.0091,0,0,-0.0091,10.244,3.132)"><path d="M245 635C92 635 37 457 37 312C37 149 91 -12 244 -12C395 -12 449 166 449 312C449 469 395 635 245 635ZM243 598C332 598 358 454 358 312C358 173 334 26 245 26C158 26 128 174 128 313S152 598 243 598Z" id="g50-49"></path></g></svg></span></td><td class="align_center"><span style="width: 15.3285ptpx;"><svg height="11.8174pt" id="M185" style="vertical-align:-3.1815pt" version="1.1" viewbox="-0.0498162 -8.6359 15.3285 11.8174" width="15.3285pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M686 28C612 35 607 44 591 112C563 234 541 360 519 489L489 666L457 658L147 121C100 40 89 36 24 28L17 0H240L250 28C168 34 159 41 190 101L262 237H482C495 180 503 137 510 91C517 47 514 35 441 28L433 0H677L686 28ZM475 280H285L429 541H431L475 280Z" id="g113-66"></path></g><g transform="matrix(.0091,0,0,-0.0091,10.244,3.132)"><path d="M389 0V32C297 38 291 46 291 118V635C234 613 175 595 109 583V556L161 554C203 552 207 547 207 497V118C207 46 201 38 110 32V0H389Z" id="g50-50"></path></g></svg></span></td><td class="align_center">  <svg height="11.8174pt" id="M186" style="vertical-align:-3.1815pt" version="1.1" viewbox="-0.0498162 -8.6359 15.3285 11.8174" width="15.3285pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M686 28C612 35 607 44 591 112C563 234 541 360 519 489L489 666L457 658L147 121C100 40 89 36 24 28L17 0H240L250 28C168 34 159 41 190 101L262 237H482C495 180 503 137 510 91C517 47 514 35 441 28L433 0H677L686 28ZM475 280H285L429 541H431L475 280Z" id="g113-66"></path></g><g transform="matrix(.0091,0,0,-0.0091,10.244,3.132)"><path d="M414 144C384 79 371 75 317 75H135L276 221C367 316 408 376 408 465C408 570 327 635 237 635C179 635 131 609 100 575L42 494L67 471C94 510 138 565 205 565C277 565 321 517 321 435C321 348 258 270 195 195C146 137 88 81 33 26V0H411C423 44 433 88 446 135L414 144Z" id="g50-51"></path></g></svg></td><td class="align_center"><span style="width: 7.69399ptpx;"><svg height="9.39034pt" id="M187" style="vertical-align:-3.42943pt" version="1.1" viewbox="-0.0498162 -5.96091 7.69399 9.39034" width="7.69399pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M559 271C559 395 493 448 433 448C370 448 304 394 275 297C259 245 235 121 219 37C157 54 113 110 113 201C113 310 180 386 276 429L265 457C131 410 23 326 23 186C23 83 86 5 211 -10C180 -159 167 -220 158 -252L165 -261C198 -255 236 -246 251 -218L287 -5C421 9 559 119 559 271ZM484 273C484 144 400 40 293 33L352 331C364 389 382 406 405 406C431 406 484 370 484 273Z" id="g113-253"></path></g></svg></span></td></tr><tr><td class="thead-hr" colspan="5"><hr/></td></tr><tr><td class="align_left">Bole</td><td class="align_center"> 26.8194</td><td class="align_center"> <svg height="11.786pt" id="M188" style="vertical-align:-0.3499002pt" version="1.1" viewbox="-0.0498162 -11.4361 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550Z" id="g113-54"></path></g><g transform="matrix(.013,0,0,-0.013,27.924,0)"><path d="M153 550H386L412 615L406 623H120L82 318C104 327 142 338 184 338C294 338 347 275 347 187C347 112 305 39 221 39C160 39 119 71 97 89C88 97 80 96 71 90C59 80 50 67 49 57C48 45 52 36 66 23C80 9 123 -12 169 -12C221 -11 288 15 342 59C403 109 431 165 431 225C431 308 366 395 238 395C212 395 165 379 127 364L153 550Z" id="g113-54"></path></g><g transform="matrix(.013,0,0,-0.013,37.198,0)"><path d="M528 54L331 254L528 455L492 493L294 291L96 493L60 455L257 254L60 54L96 16L294 217L492 16L528 54Z" id="g117-42"></path></g><g transform="matrix(.013,0,0,-0.013,47.734,0)"><path d="M384 0V27C293 34 287 42 287 114V635C232 613 172 594 109 583V559L157 557C201 555 205 550 205 499V114C205 42 199 34 109 27V0H384Z" id="g113-50"></path></g><g transform="matrix(.013,0,0,-0.013,53.974,0)"><path d="M241 635C89 635 35 457 35 312C35 153 89 -12 240 -12C390 -12 443 166 443 312C443 466 390 635 241 635ZM238 602C329 602 354 454 354 312C354 172 330 22 240 22C152 22 124 173 124 313S148 602 238 602Z" id="g113-49"></path></g><g transform="matrix(.0091,0,0,-0.0091,60.214,-5.741)"><path d="M556 236V289H56V236H556Z" id="g54-33"></path></g><g transform="matrix(.0091,0,0,-0.0091,65.774,-5.741)"><path d="M158 548H390L417 615L410 623H122L83 318C105 326 143 337 185 337C296 337 350 275 350 188C350 116 308 42 225 42C164 42 122 74 100 93C90 101 82 99 72 92C60 82 51 68 50 59C48 46 52 38 66 24C82 9 125 -12 172 -12C225 -11 292 15 346 59C408 108 437 166 437 226C437 309 371 397 242 397C214 397 170 382 133 369L158 548Z" id="g50-54"></path></g></svg></td><td class="align_center"> -2.0234</td><td class="align_center"> 196.2153</td></tr><tr><td class="align_left">Tamale</td><td class="align_center"> 28.5058</td><td class="align_center"> <svg height="11.9413pt" id="M189" style="vertical-align:-0.3499002pt" version="1.1" viewbox="-0.0498162 -11.5914 75.3647 11.9413" width="75.3647pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M285 378C315 398 338 416 353 432C373 451 384 474 384 503C384 579 325 635 236 635H235C182 635 136 610 108 579L65 516L85 496C110 533 150 575 205 575C258 575 300 543 300 481C300 407 232 369 141 339L147 310C163 315 188 321 211 321C268 321 338 284 338 192C338 94 288 40 217 40C160 40 119 68 93 91C85 98 77 97 69 91C60 84 47 71 46 58C44 46 48 35 62 22C75 10 116 -12 162 -12C234 -12 424 62 424 224C424 297 373 359 285 376V378Z" id="g113-52"></path></g><g transform="matrix(.013,0,0,-0.013,6.24,0)"><path d="M113 -12C146 -12 170 11 170 46C170 78 146 103 114 103S58 78 58 46C58 11 82 -12 113 -12Z" id="g113-47"></path></g><g transform="matrix(.013,0,0,-0.013,9.204,0)"><path d="M447 623H65C61 580 56 530 47 475H76C100 541 106 550 172 550H388C308 376 196 170 91 -1L98 -12L172 -2C268 204 360 408 455 611L447 623Z" id="g113-56"></path></g><g transform="matrix(.013,0,0,-0.013,15.446,0)"><path d="M241 635C89 635 35 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-12 449 166 449 312C449 469 395 635 245 635ZM243 598C332 598 358 454 358 312C358 173 334 26 245 26C158 26 128 174 128 313S152 598 243 598Z" id="g50-49"></path></g><g transform="matrix(.0091,0,0,-0.0091,70.206,-5.741)"><path d="M158 548H390L417 615L410 623H122L83 318C105 326 143 337 185 337C296 337 350 275 350 188C350 116 308 42 225 42C164 42 122 74 100 93C90 101 82 99 72 92C60 82 51 68 50 59C48 46 52 38 66 24C82 9 125 -12 172 -12C225 -11 292 15 346 59C408 108 437 166 437 226C437 309 371 397 242 397C214 397 170 382 133 369L158 548Z" id="g50-54"></path></g></svg></td><td class="align_center"> -2.1026</td><td class="align_center"> 200.5695</td></tr><tr class="table-tr"><td colspan="5"><hr class="tbody-hr"/></td></tr></table></td></tr></table>

<div>Estimated parameters for deterministic seasonality model.</div>

International Journal of Stochastic Analysis

tab6

Table 6

Table 6: Regime-Switching Temperature Dynamics Model for Weather Derivatives 