Wind Derivatives: Hedging Wind Risk Msc Thesis Applied Mathematics " Wind Derivatives: Hedging Wind Risk "

Preface Over the last 11 months, I have done research in the field of wind derivatives for my MSc thesis. I performed this research in close cooperation with Mercurious, and my professor Kees Oosterlee. In October 2012 the MSc thesis project was born at CWI in Amsterdam. That day I met with Kees Oosterlee and Jerry de Leeuw (managing director of Mercurious). Mercurious had spotted the opportunity in the market, and services energy producing companies that were looking into wind risk hedging. Kees Oosterlee believed in the idea, and I was looking for a challenging thesis subject. This resulted in the start of the project in December 2012. Although I have encountered wind for as long as I can remember, it was fun to dive into this phenomenon. Examining wind at this level was totally new for me, but as I noticed throughout the project, many people are interested in wind as a phenomenon. This makes talking about the MSc subject fun, even if it is not to fellow mathematicians. The project proved to be a nice mixture of a some physics, mathematics and a direct application. Combining this with wind turbines being a hot topic made this great project. As I did the financial track within the MSc program of Applied Mathematics, an MSc thesis in this field was a logical choice. Although I had followed courses in Financial Mathematics and Computational Finance, it increased my understanding of these course significantly. It turned out that not much research had been done into wind derivatives. It was great to be one of the people to have a better look at wind as a statistical phenomenon. In the first months I maintained a website (http://www.windderivatives.com) to keep people who were interested up-to-date. In a weekly update I wrote my progress and what I had done that week. For me, this was a great way to keep a good overview of what I was doing. After a couple of months, I had to focus more on the modeling, no interesting results were booked each week and I decided to stop updating the website. This document presents an overview of the thesis work I did. The report is written for people who have understanding of basic probability theory, stochastic differential equations and a little mathematical finance. MATLAB was used for all the computations and the code is available upon request.