Comparing Temperature Density Forecasts from GARCH and Atmospheric Models

Taylor, James and Buizza, Roberto (2004) Comparing Temperature Density Forecasts from GARCH and Atmospheric Models. Journal of Forecasting, 23 (5). pp. 337-355.

Abstract

Density forecasts for weather variables are useful for the many industries exposed to weather risk. Weather ensemble predictions are generated from atmospheric models and consist of multiple future scenarios for a weather variable. The distribution of the scenarios can be used as a density forecast, which is needed for pricing weather derivatives. We consider one to 10-day-ahead density forecasts provided by temperature ensemble predictions. More specifically, we evaluate forecasts of the mean and quantiles of the density. The mean of the ensemble scenarios is the most accurate forecast for the mean of the density. We use quantile regression to debias the quantiles of the distribution of the ensemble scenarios. The resultant quantile forecasts compare favourably with those from a GARCH model. These results indicate the strong potential for the use of ensemble prediction in temperature density forecasting.

Item Type: Article
Keywords: Weather ensemble predictions; GARCH; Quantile regression; Quantile autoregression; Quantile forecast evaluation
Subject(s): Management science
Date Deposited: 24 Jan 2012 20:14
Last Modified: 10 Feb 2017 16:55
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1722

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