Modeling and Pricing Rainfall Derivatives to HedgeWeather Risk in Kenya

Show simple item record Okemwa, Phillip Akuma 2018-02-12T12:00:22Z 2018-02-12T12:00:22Z 2018-02-12
dc.description Master of Science in Mathematics (Financial Option) en_US
dc.description.abstract This study set out to price rainfall derivatives based on rainfall at a particular location in Kenya over a given period. We employ a Markovian-Gamma model to model the rainfall process. In addition, its parameters are determined via maximum likelihood estimation. We assume existence of a tradable asset whose performance is rainfall dependent. To compute the prices of the rainfall derivatives, we rely on the Esscher transform, an actuarial tool. We then compare the Esscher prices with the standard Black-Scholes prices. The results suggest a certain pattern of movement of the prices in which the derivative price decreases as the strike price increases in the Black-Scholes whereas they increase on considering the Esscher. The study is conducted using rainfall and stock market data in Kenya. en_US
dc.description.sponsorship Prof. Patrick G.O. Weke University of Nairobi, Kenya Prof. John M. Kihoro Co-operative University, Kenya Dr. Philip Ngare University Of Nairobi, Kenya en_US
dc.language.iso en en_US
dc.publisher JKUAT-PAUSTI en_US
dc.subject Modeling en_US
dc.subject Pricing en_US
dc.subject Rainfall Derivatives en_US
dc.subject HedgeWeather Risk en_US
dc.title Modeling and Pricing Rainfall Derivatives to HedgeWeather Risk in Kenya en_US
dc.type Thesis en_US

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