Home > Securitization > Asset Classes > Weather Derivatives
[This page is a series of focused write-ups on applications in securitisation. For other applications, see the Securitisation Applications section on the Securitisation home page.]
What is weather risk securitization:
Weather risk securitization is essentially a risk securitization device, similar to cat bonds methodology but the inherent risk being transferred is not insurance risk but risk of weather fluctuations.
Weather may be a source of risk for several industries. Take, for example, the case of an energy utility. The demand for power is directled related to temperature going up in summer or going down in winter for temperature control. If, therefore, you have an unusually cool summer, the demand for power will be much lesser than anticipated, and same in case of an unusually warm winter. Several electricity utilities enter into power purchase agreements based on anticipated demand, and would face serious financial losses in such cases.
Weather derivatives provide such companies an option to hedge against risk of weather fluctuations.
Several other industries may be affected by weather movements – agriculture or agro-based industry is one example.
The first case of securitization of weather derivatives was Koch Industries in the USA, reported on this site –click here to see this news item. Later, we have discussed the development of weather bonds market in USA as well as in Europe – click here.
Links:
[Number of these links are based on Artemis website .]
A dedicated site on weather derivatives – weatherderivs.com
A site on energy and weather derivatives – http://www.evomarkets.com/weather/
Very easy to read FAQs on weather bonds: http://www.wrma.org/faqs.html
Several articles on weather derivatives by Dr Bob Dischel http://www.wxpx.com/wxpubs.htm
Saddle River Futures website: very good resources on weather risk managementhttp://www.saddleriverfutures.com/weather.htm
What is Weather Risk?
Article by Jack Cogen, President Natsource Inc.
Weather Derivatives 101
Intro to weather derivatives from maxenergy.com
Introduction to Weather Derivatives
Article from Speedwell Derivatives Limited
New Tools of the Risk Trade
Article by Sally Stewart, Product Manager, Risk of Transenergy Management Inc.
Utilities still warming to the weather
Article by Bob Dischel, Ph.D.
Weather Risk: An Example from the UK
Article from Energy and Power Risk Magazine
Vulnerable companies bet billions on weather
Article from the Seattle Times
Effectively Structuring And Pricing Weather Derivatives
Presentation from Koch Weather Risk Management
The Fledgling Weather Market Takes Off Part 1: Weather Sensitivity, Weather Derivatives & A Pricing Model
Article from Applied Derivatives Trading
The Fledgling Weather Market Takes Off Part 2: Weather Data for Pricing Weather Derivatives
Article from Applied Derivatives Trading
The Fledgling Weather Market Takes Off Part 3: Seasonal Forecasts And The Weather Market
Article from Applied Derivatives Trading
Betting against God
Article from Forbes Global
Short-circuited
Electricity risk management article from Treasury & Risk Management
A Calculus of Risk
Article from Scientific American
Cold Winter On the Way? Some Bet On It!
Article from the Wall Street Journal
If You Can't Stand the Heat, Buy a Swap
Article from Zurich ReNorth America
How to turn Droughts, Floods & Hurricanes into successful speculative opportunities
Article by James Roemer of Roemer Weather Inc.
Weather Risk Management for Fuel Oil Distributors
Presentation from Koch Weather Risk Management
Weather Risk Management for the Power Industry
Presentation from Koch Weather Risk Management
Weather Risk Management for Propane Distributors
Presentation from Koch Weather Risk Management
Option Pricing – Black-Scholes Won't Do – Part 1
Article by Robert Dischel Ph.D.
Option Pricing – Black-Scholes Won't Do – Part 2
Article by Robert Dischel Ph.D.
Option Pricing – Black-Scholes Won't Do – Part 3
Article by Robert Dischel Ph.D.
Warning – La Niña Volatility
Article by Robert Dischel Ph.D.
At Last: A Model for Weather Risk – Part 1
Article by Robert Dischel Ph.D.
At Last: A Model for Weather Risk – Part 2
Article by Robert Dischel Ph.D.
