The Weather Option Pricing Research

With the development of financial markets there are more and more kinds ofoptions Followed by the different types of derivatives can be traded. In the process ofthis development, weather options arise at the historic moment. Weather optionsbecome to be a new way of risk management. It not only has carried on the riskaversion for the enterprise, at the same time in the process of options trading canobtain certain benefits.Although today’s science and technology is so developed, but so far it is verydifficult for humans to100%accurate weather forecasts. At the same time people cannot take measures to control the weather changing. So because of the changeable anduncontrollable weather many of these industries caused huge property losses. In theUnited States, a survey about weather report clearly pointed out that80%ofcompanies and factories regard the weather as an important indicator of influenceenterprise profit or loss. Weather index is also a major economic factors.At the sametime, about40%of the U.S. economy is directly affected by the weather.So the weather has a vital role to the development of enterprises. And accordingto the weather analysis of agricultural growth and harvest, and the development ofenergy and transportation, the gains and losses of the enterprise, as we take theweather itself from trading directly. With the popularity of this thought graduallyhappened with the weather futures and options. In this paper by using wavelettransform and Fourier transform has carried on the fitting to the data analysis,respectively and then compare the advantages of wavelet transform. The article also inthe fourth chapter and the fifth chapter gives the empirical study of the option pricing.This article fully demonstrates the wavelet transform in the option pricing theorymeaning and realistic meaning.The full text is divided into six parts:The first part elaborated this article research background and significance oftopics to illustrate the significance of the research.The second part reviews the weather option pricing process and achievement ofthe research field both at home and abroad.The third part introduces the weather options theory and wavelet transform andFourier transform theoretical knowledge.The fourth part of the wavelet transform and Fourier transform data fitting andcompared to the weather.The fifth use wavelet transform to fitting the data of option pricing and comparedwith the actual value. The sixth part is introduced in this paper, the conclusion and revelation.