price_weather_option: Price HDD and CDD Weather Derivatives

In weatherMRJD: Weather Analysis and Markov Regime Switching Jump Diffusion Models

Price HDD and CDD Weather Derivatives

Description

Evaluates fair values and Monte Carlo standard errors for HDD and CDD Call Options.

Usage

price_weather_option(
  temp_paths,
  strike,
  type = c("HDD", "CDD"),
  r = 0.04,
  base_temp = 18
)

Arguments

temp_paths	Matrix of simulated temperature paths from simulate_weather_paths.
strike	Strike index level K.
type	Option contract type: "HDD" or "CDD".
r	Risk-free discount rate (default 0.04).
base_temp	Threshold index baseline (default 18.0 deg C).

Value

A list containing estimated price, standard error, and index distribution metrics.

Examples

paths <- simulate_weather_paths(n_paths = 100, days = 90)
hdd_opt <- price_weather_option(paths, strike = 500, type = "HDD")
print(hdd_opt$price)

weatherMRJD documentation built on Aug. 20, 2026, 5:10 p.m.