Weather Derivatives

Abstract

The article deal with the problems of weather derivatives which take the value in sequence nowadays. The aim of this work is the definition of weather derivatives and the way how to price them. We show as well that linear and nonlinear models of time series of temperatures measured in Prague and in Brno have not good results in the estimation of parameters μ I and σ I of the probability distribution function P(I) of the weather index which is essential in their pricing.