Postgraduate Scholarship Pricing Temperature Derivatives and Modelling the Market Price of Risk



School of Mathematics, Statistics and Actuarial Science

Project: Pricing temperature derivatives and modelling the market price of risk.

Main Supervisor: A. Alexandridis

Weather derivatives are financial instruments that can be used in order to reduce risk associated with adverse or unexpected weather conditions. Just as traditional contingent claims, whose payoffs depend upon the price of some fundamental, a weather derivative has an underlying measure such as temperature. In contrast, to the classical financial markets, the weather market is incomplete in the sense that the underlying asset has no value and it cannot be stored or traded.

The weather market is one of the fastest developing markets. However, a general accepted framework is missing for the literature. The main reasons are the difficulty in pricing the traded financial products as well as the difficulty in accurately modelling the underlying weather variables.

The aim of this project is to develop a pricing framework for weather derivatives as well as to study the market price of risk. This project will focus on developing theoretical, numerical methods as well as to study real data from the weather market.

More details and references can be found at: http://www.kent.ac.uk/smsas/documents/KCF-project-autumn-2013.pdf

The proposed PhD project will focus on:

  • Extending the ideas of Alexandridis & Zapranis (2013) in modelling and pricing weather derivatives.
  • Study the market price of risk and develop an estimation method.
  • Developing flexible models to explore and extend the volatility model of weather derivatives of Benth, F. E., and Saltyte-Benth, J. (2011).

School of Mathematics, Statistics and Actuarial Science

The successful candidate will be registered for a PhD in the School of Mathematics, Statistics and Actuarial Science and will be a member of the Centre for Actuarial Science, Risk and Investment and the Kent Centre for Finance. The School offers a lively research culture with a thriving group of around 250 taught postgraduates students and almost 100 postgraduate students, postdoctoral researchers and academic staff. Kent is among the best research-intensive universities in the UK. In the 2008 Research Assessment Exercise (RAE), the university was ranked 24th out of 159 institutions for its world-leading research, with six of our subject areas including statistics in the top ten nationwide.

Funding
The studentship is supported for 3.5 years and includes full Home/EU/overseas tuition fees plus a stipend of £13,726 per annum.

Entry Requirements
All candidates must have an excellent academic track record with a first degree in an actuarial, mathematical, statistical or economics-based subject along with a Masters qualification in a related subject.

To apply
To apply complete the online application form available by clicking the ‘Apply’ button below or by visiting: http://www.kent.ac.uk/studying/postgrad/apply/index.html

You should choose the PhD programme in either Mathematics, Statistics or Actuarial Science and select School research Scholarship under `How are you intending to fund your studies?’. You should indicate in your application that you wish to apply for this specific project and include a brief statement explaining why you are a suitable candidate.

Closing date: 22nd November, 2013. The scholarship will start in January 2014.

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