Temperature modelling and pricing of temperature index insurance

  • Mukminah Darus
  • Che Mohd Imran Che TaibEmail author
Original Paper


In this paper, we use continuous-time autoregressive process to explain evolution of the temperature dynamics. We take data of New York daily average temperatures as our empirical study. Our analysis indicates continuous-time autoregressive of order 3 fits data very well. The model is employed in the pricing of index based temperature insurance. In the context of agricultural industry, our study revealed that the price of insurance obtained from temperature dynamical modelling is far more expensive than the price obtained from classical approaches of burn analysis and index modelling.


Continuous-time autoregressive process Temperature dynamical modelling Burn analysis Index modelling Temperature index insurance 

Mathematics Subject Classification

60G10 91B70 62M10 



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Copyright information

© The JJIAM Publishing Committee and Springer Japan KK, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of Informatics and Applied MathematicsUniversity Malaysia TerengganuKuala TerengganuMalaysia

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