Weather derivatives: Concept and application for their use in South Africa

J.M. Geyser

Agrekon, 2004, vol. 43, issue 4, 21

Abstract: Recent innovations in energy markets suggest the possibility of addressing agricultural risk factors by issuing derivatives on weather elements. Such instruments appear particularly attractive, as asymmetric information and loss adjustment issues do not affect them. This article first describes the concept, functioning and application of weather derivatives. It then examines the feasibility of rainfall derivatives to manage agricultural production risk in South Africa by evaluating the merits of rainfall options, and suggesting an option strategy, as a yield risk management tool. The use of rainfall derivatives in South Africa is likely to increase in future as capital markets, financial institutions, insurance companies, crop insurance companies and hedge funds collectively organize themselves to share and distribute weather risks.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://ageconsearch.umn.edu/record/9490/files/43040444.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:agreko:9490

DOI: 10.22004/ag.econ.9490

Access Statistics for this article

More articles in Agrekon from Agricultural Economics Association of South Africa (AEASA) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().