THE TEMPERATURE-BASED DERIVATIVES CONTRACTS – NEW PRODUCTS OF WEATHER RISK INDUSTRY

Mirela Matei () and Catalin Voica ()
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Mirela Matei: Petroleum and Gas University from Ploiesti, Romania
Catalin Voica: Petroleum and Gas University from Ploiesti, Romania
Authors registered in the RePEc Author Service: Mirela Panait ()

The Annals of the "Stefan cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration, 2011, vol. 11, issue 1(13), 141-147

Abstract: The temperature-based derivatives contracts have appeared while the first deregulations in the utilities and the energy sectors from USA in the years 1990-2000. The transfer of the some services in the private sector has involved a better control of costs and revenues of different companies. The private investors who have turned to this area, have imposed a risk reduction management more complex than that used by any public company, in order to ensure their profits and a smaller variation of profit from one year to another. Initially, the temperature-based contracts were traded on over-the-counter market, but this type of trading has not provided a fast development of market. A turning point in the growth of market was the launch of the first derivative exchange-traded contracts in the summer of 1999 at the Chicago Mercantile Exchange (CME).In this article, we conducted an analysis of the temperature derivative contracts having regard to their economic importance, the major implications of weather on national economies and lack of traditional insurance products for temperature’s variance. From their occurrence to date, these contracts have won every field that is influenced by meteorological variables always being finding new ways to translate in derivatives contracts different components influence of the weather.

Keywords: weather derivative; HDD; CDD; temperature (search for similar items in EconPapers)
Date: 2011
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