134 Valuation and Risk Management of Weather Derivatives: The Application of CME Rainfall Index Binary Contracts Table 3 The Coefficients of the Truncated Fourier Series in the Occurrence Model Estimated by MLE and the Values of the AIC and BIC Order θj cj0 cj1 dj1 cj2 dj2 cj3 dj3 cj4 dj4 cj5 dj5 AIC BIC U 1 p00 0.7613 -0.0314 0.0442 16451.3 16463.0 -8222 p10 0.5644 -0.0302 0.0185 8741.1 8752.8 -4367 2 p00 0.7612 -0.0320 0.0452 0.0094 -0.0027 16451.2 16470.7 -8220 p10 0.5652 -0.0274 0.0184 0.0254 0.0175 8732.9 8752.4 -4361 3 p00 0.7612 -0.0322 0.0451 0.0098 -0.0020 0.0007 -0.0067 16453.2 16480.5 -8219 p10 0.5651 -0.0273 0.0184 0.0255 0.0184 -0.0047 0.0076 8735.8 8763.1 -4360 4 p00 0.7611 -0.0322 0.0451 0.0099 -0.0021 0.0000 -0.0065 0.0052 0.0019 16455.8 16490.9 -8218 p10 0.5651 -0.0274 0.0183 0.0253 0.0183 -0.0036 0.0079 0.0036 0.0101 8735.8 8763.1 -4360 5 p00 0.7610 -0.0320 0.0451 0.0097 -0.0020 0.0001 -0.0063 0.0056 0.0011 -0.0061 0.0033 16457.6 16500.5 -8217 p10 0.5651 -0.0274 0.0183 0.0253 0.0184 -0.0036 0.0080 0.0036 0.0101 0.0002 -0.0004 8742.3 8785.2 -4360 Figure 3 Estimated Fourier Series of Transition Probabilities
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