In the summer term 2021 Dr. Wolfgang Schanz will offer a special course in reinsurance in cooperation with SCOR Reinsurance. The course will discuss the "Modelling of a parametric weather derivatives using time series analysis".
Detailed description of the topic:
"Parametric covers can be used in insurance and reinsurance to hedge against weather events, e.g., an energy provider can buy a cover which gives a payout for higher-than-average temperatures during winter in specific region to compensate for less revenue (due to less heating). Opposed to parametric covers based on cat events (e.g., earthquake), such covers are usually designed to trigger frequently (i.e., every 5 - 10 years), making a determination of the price based on historic data feasible (experience modelling). However, when exploring different options for such covers it can be of advantage to model the underlying trigger variable (e.g., daily temperature) instead of more aggregate parameters (e.g., expected annual payout). Such approach, however, introduces the question of dependencies (most likely the weather tomorrow is like the weather today). Time series analysis and models give tools to handle such questions, but there are some challenges to tackle beforehand such as the estimation of seasonality or temperature trends due to global warming. We would like the participants to explore those issues, i.e., to analyze a given time series of weather data in varying detail and its impact on the pricing of a cover based on this time series to identify issues and propose solutions and models to cope with it.
We expect from the participants some prior knowledge on time series analysis and/or the willingness to autonomously gain some, same holds for the experience with a suitable software package like R."
During the course the students will work in groups on given problems and present their solutions in the course.