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Department of IE Professor , mehrjerdyazd@gmail.com
Abstract:   (92 Views)


Production and services industries such as agriculture and tourism are exposed to many uncontrollable external risks e.g. weather-related risks. Current traditional insurance model which is based on assessing the damage after its occurrence is costly and not scalable. For weather-related risk, weather derivatives were introduced as an alternative. However the current common weather derivatives cannot capture the complexity of the relationship between the weather and the risk to investment. This paper presents a general framework for modeling this complex relationship by introducing indemnity functions with the external series (e.g. minimum temperature) as an input and indemnity as output. This framework allows for the indemnity to vary based on time and many relevant properties of the series. As an example the framework allows for higher indemnity for pistachio frost risk if the preceding period to a frost day is warmer than usual. We apply the methods developed in this paper to pistachio production’s weather risk in Kerman Province of Iran.

Full-Text [DOCX 617 kb]   (14 Downloads)    
Type of Study: Research | Subject: Safety, Security and Risk Managment
Received: 2017/01/6 | Accepted: 2018/06/12

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