In this paper, an attempt is made to implement market-based risk measures in the process of weather risk management. A weather-VaR plays a significant role in the risk evaluation of non-extreme weather events and the process of its management, even in terms of weather derivatives. The innovative nature of the work results from the approach to model the weather factor as a "causative" instrument based on the specific historical data and not specific knowledge that typical weather forecasters have. The use of the bootstrap method to verify the indications of the VaR method is another advantage of the presented model. The obtained additional confidence interval is strengthening the VaR indications. The implementation of the weather VaR concept to derivative valuation may significantly influence the market of forward-looking weather contracts.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.