Evaluating Rainfall Risk Profile of Indian Subcontinent Based on Index Metrics

Abstract

Floods and droughts represent an embedded monsoon factor impacting the Indian economy. Evaluating monsoon risk based on rainfall index metrics could help design appropriate alternative risk transfer products.  This study proposes a new set of rainfall indices that can be used to explore the excess rainfall risk profile of the Indian Subcontinent. The study proposed a new set of indices for evaluating excess rainfall risk profiles which are defined as Excess Rainfall Days (ERDs). The methodology proceeds in a step-wise form: Empirical values of ERDs over 50 years for selected MSDs of India are derived, and then these index values are analyzed for determining the degree of variability and volatility, followed by the examination of the degree of inter-correlation amongst indices of selected Meteorological Sub-divisions. The research is based on the applications of econometric models such as the Augmented Dickey-Fuller (ADF) test followed by the GARCH model. The results revealed that several of the statistical properties of ERD indices support the idea that these indices could be used as building blocks for designing rainfall derivatives similar to HDDs/CDDs underlying temperature derivatives.