In this study, we propose a regime-switching model for temperature dynamics, where the parameters depend on a Markov chain. We improve upon the traditional models by modeling jumps in temperature dynamics via the chain itself. Moreover, we compare the performance of the proposed model with the existing models. The results indicate that the proposed model outperforms in the short time forecast horizon while the forecast performance of the proposed model is in line with the existing models for the long time horizon. It is shown that the proposed model is a relatively better representation of temperature dynamics compared to the existing models. Furthermore, we derive prices of weather derivatives written on several temperature indices.

中文翻译：

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用于温度建模的模式切换模型及其在天气衍生产品定价中的应用

在这项研究中，我们提出了温度动态的政权转换模型，其中参数取决于马尔可夫链。我们通过对链本身温度动态变化的建模来改进传统模型。此外，我们将提出的模型与现有模型的性能进行了比较。结果表明，该模型在短期预测范围内表现优异，而其预测性能与现有模型在较长时间范围内的预测结果一致。结果表明，与现有模型相比，所提出的模型是相对更好的温度动态表示。此外，我们得出写在几个温度指数上的天气衍生产品的价格。