Suppose that you have 50 years of temperature data at your


1. Suppose that you have 50 years of temperature data at your disposal. Explain carefully the analyses you would carry out to value a forward contract on the cumulative CDD for a particular month.

2. Would you expect the volatility of the 1-year forward price of oil to be greater than or less than the volatility of the spot price? Explain your answer.

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Financial Econometrics: Suppose that you have 50 years of temperature data at your
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