Regime-Switching Temperature Dynamics Model for Weather Derivatives

<table class="fixed-width table-group" id="tab8"><tr><td><table class="table"><colgroup><col style="width:5.40em"/><col style="width:3.95em"/><col style="width:3.93em"/><col style="width:4.36em"/><col style="width:3.75em"/><col style="width:3.98em"/><col style="width:3.97em"/></colgroup><tr><td class="thead-hr" colspan="7"><hr/></td></tr><tr class="thead"><td class="align_left">Parameter</td><td class="align_center"><span style="width: 11.8314ptpx;"><svg height="9.32509pt" id="M212" style="vertical-align:-3.1815pt" version="1.1" viewbox="-0.0498162 -6.14359 11.8314 9.32509" width="11.8314pt" 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="M548 455L523 469C505 448 490 439 461 439C416 439 374 447 316 447C144 447 23 310 23 161C23 47 89 -12 179 -12C312 -12 429 106 429 244C429 303 419 344 368 386L371 388C404 383 440 378 474 378C507 378 530 411 548 455ZM350 274C350 191 308 25 198 25C144 25 108 75 108 157C108 264 170 395 276 395C296 395 320 384 333 360C347 334 350 316 350 274Z" id="g113-240"></path></g><g transform="matrix(.0091,0,0,-0.0091,6.76,3.132)"><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"><span style="width: 6.71534ptpx;"><svg height="6.1673pt" id="M213" style="vertical-align:-0.2063904pt" version="1.1" viewbox="-0.0498162 -5.96091 6.71534 6.1673" width="6.71534pt" 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="M484 406C484 429 465 448 438 448C400 448 352 405 302 356L156 213L191 373C195 391 197 404 197 416C197 436 191 448 178 448C151 448 83 406 23 350L37 328C67 350 101 369 109 369C114 369 115 362 111 344L29 -5L34 -12C63 -5 86 -1 111 3C124 73 137 138 147 161C165 180 189 202 206 217C215 194 249 111 275 57C304 -1 319 -12 342 -12C368 -12 405 -5 471 92L454 115C427 80 395 55 384 55C374 55 364 58 341 106L262 274C282 296 367 378 414 378C427 378 440 370 444 367C449 363 454 362 462 368C476 379 484 395 484 406Z" id="g113-232"></path></g></svg></span></td><td class="align_center"><span style="width: 7.34167ptpx;"><svg height="9.39034pt" id="M214" style="vertical-align:-3.42943pt" version="1.1" viewbox="-0.0498162 -5.96091 7.34167 9.39034" width="7.34167pt" 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="M538 96L524 119C492 88 454 63 446 63C439 63 434 70 440 101C463 223 491 341 518 448H508L433 422L401 276C355 192 240 56 188 56C163 56 154 89 163 133C184 233 207 338 235 443L230 448L152 424L58 17C40 -60 23 -143 23 -185C23 -241 42 -261 63 -261C92 -261 117 -241 125 -227L124 -221C109 -209 89 -165 89 -103C89 -55 96 -13 105 26H107C121 -3 134 -12 151 -12C172 -12 194 -5 221 16C279 61 330 124 384 194H386C381 159 377 141 368 105C343 3 363 -12 383 -12C416 -12 486 35 538 96Z" id="g113-234"></path></g></svg></span></td><td class="align_center"><span style="width: 11.8314ptpx;"><svg height="9.32509pt" id="M215" style="vertical-align:-3.1815pt" version="1.1" viewbox="-0.0498162 -6.14359 11.8314 9.32509" width="11.8314pt" 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="M548 455L523 469C505 448 490 439 461 439C416 439 374 447 316 447C144 447 23 310 23 161C23 47 89 -12 179 -12C312 -12 429 106 429 244C429 303 419 344 368 386L371 388C404 383 440 378 474 378C507 378 530 411 548 455ZM350 274C350 191 308 25 198 25C144 25 108 75 108 157C108 264 170 395 276 395C296 395 320 384 333 360C347 334 350 316 350 274Z" id="g113-240"></path></g><g transform="matrix(.0091,0,0,-0.0091,6.76,3.132)"><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></span></td><td class="align_center"><span style="width: 16.9061ptpx;"><svg height="10.2124pt" id="M216" style="vertical-align:-3.42943pt" version="1.1" viewbox="-0.0498162 -6.78297 16.9061 10.2124" width="16.9061pt" 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="M570 304C570 398 525 448 414 448C385 448 343 445 312 434L329 511L321 518C297 504 262 482 244 460L233 411C195 397 159 381 128 358L135 332C160 347 189 360 224 373L111 -147C97 -210 84 -218 17 -231L13 -257L254 -247L259 -218L233 -216C183 -212 177 -202 189 -142L218 -1C238 -10 266 -12 283 -12C351 3 429 48 483 105C543 168 570 242 570 304ZM482 289C482 161 380 33 304 33C278 33 248 51 233 69L303 396C326 400 352 403 369 403C428 403 482 380 482 289Z" id="g113-113"></path></g><g transform="matrix(.0091,0,0,-0.0091,7.384,3.132)"><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><g transform="matrix(.0091,0,0,-0.0091,11.816,3.132)"><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"><span style="width: 16.9061ptpx;"><svg height="10.2124pt" id="M217" style="vertical-align:-3.42943pt" version="1.1" viewbox="-0.0498162 -6.78297 16.9061 10.2124" width="16.9061pt" 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="M570 304C570 398 525 448 414 448C385 448 343 445 312 434L329 511L321 518C297 504 262 482 244 460L233 411C195 397 159 381 128 358L135 332C160 347 189 360 224 373L111 -147C97 -210 84 -218 17 -231L13 -257L254 -247L259 -218L233 -216C183 -212 177 -202 189 -142L218 -1C238 -10 266 -12 283 -12C351 3 429 48 483 105C543 168 570 242 570 304ZM482 289C482 161 380 33 304 33C278 33 248 51 233 69L303 396C326 400 352 403 369 403C428 403 482 380 482 289Z" id="g113-113"></path></g><g transform="matrix(.0091,0,0,-0.0091,7.384,3.132)"><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><g transform="matrix(.0091,0,0,-0.0091,11.816,3.132)"><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></span></td></tr><tr><td class="thead-hr" colspan="7"><hr/></td></tr><tr><td class="align_left">Bole <br/></td><td class="align_center">0.0656</td><td class="align_center">0.2047</td><td class="align_center">29.8465</td><td class="align_center">1.3939</td><td class="align_center">0.9913</td><td class="align_center">0.9490</td></tr><tr><td class="align_left">Tamale <br/></td><td class="align_center">0.0100</td><td class="align_center">0.3574</td><td class="align_center">31.7835</td><td class="align_center">1.4579</td><td class="align_center">0.9909</td><td class="align_center">0.9135</td></tr><tr class="table-tr"><td colspan="7"><hr class="tbody-hr"/></td></tr></table></td></tr></table>

<div>Estimated parameters for TML model.</div>

International Journal of Stochastic Analysis

tab8

Table 8

Table 8: Regime-Switching Temperature Dynamics Model for Weather Derivatives 