Evaluating Rainfall Risk Profile of Indian Subcontinent Based on Index Metrics

Keywords: Rainfall Indexation, Floods, Excess Rainfall Days (Erds), Rainfall Derivatives.


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.

Author Biographies

Bharath V, University of Mysore, India

Research Scholar

DoS in Commerce

University of Mysore, Mysuru, Karnataka, India

E-mail: [email protected]

Kotreshwar G, Senior Fellow, ICSSR, India

Professor (Rtd.)

Senior Fellow, ICSSR, New Delhi, India

E-mail: [email protected]


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How to Cite
V, B., & G, K. (2020). Evaluating Rainfall Risk Profile of Indian Subcontinent Based on Index Metrics. Indian Journal of Finance and Banking, 4(2), 38-50. https://doi.org/10.46281/ijfb.v4i2.700
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper