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- Title
Managing Meteorological Risk through Expected Shortfall.
- Authors
Stefani, Silvana; Kutrolli, Gleda; Moretto, Enrico; Kulakov, Sergei
- Abstract
This paper focuses on weather derivatives as efficient risk management instruments and proposes a more advanced approach for their pricing. An "hybrid" contract is introduced, combining insurance properties, specifically tailored for the region under study and introducing Value-at-Risk (VaR) and Expected Shortfall (ES) as appropriate measures for the strike price. The numerical results show that VaR and ES are both efficient ways for managing the so-called Tail Risk; further, being ES more conservative than VaR and due to its subadditivity property, it can be seen that seasonal contracts are generally better off than monthly contracts in reducing global risk.
- Subjects
INVESTMENT risk; PORTFOLIO diversification; VALUE at risk; RISK
- Publication
Risks, 2020, Vol 8, Issue 4, p118
- ISSN
2227-9091
- Publication type
Article
- DOI
10.3390/risks8040118