weather derivative

Despite the growing popularity of weather derivatives, there are some executives who say that they will never participate in the market.

Weather derivatives were introduced six years ago and popularized in the energy industry by Enron.

After that humble beginning, weather derivatives slowly began trading over-the-counter in 1997.

Weather derivatives provide a pure non-correlated alternative to traditional financial markets.

Typically weather derivatives are priced in a number of ways:

Q. Can individuals use weather derivatives, to, say, hedge their barbecues?

This year, buying a weather derivative may have seemed a waste, because it was unseasonably warm.

Heating degree days are one of the most common types of weather derivative.

It also concerns contracts, which are financial services such as contracts for difference and weather derivatives.

The difference from other derivatives is that the underlying asset (rain/temperature/snow) has no direct value to price the weather derivative.

Weather derivatives allow companies whose earnings are affected by nature's variables - temperature, precipitation, frost and others - to hedge against that risk.

Energy companies can offer this type of pricing by hedging the risks of fluctuating demand using Weather derivatives.

The new method includes operational risk transfer and mitigation through insurance, weather derivatives and "world class" preventive maintenance programs.

The fledgling market for weather derivatives is expanding rapidly, they say, and the nasty weather is only going to help.

After being created by an investment bank, weather derivatives can be held, traded, or sold off to third-party investors - which is where the risk comes in.

That warming could dampen heating needs by as much as 18 percent, said a report by Weather Derivatives.

A major early pioneer in weather derivatives was Enron Corporation, through its EnronOnline unit.

Enron Weather (weather derivatives).

When they are standardized and traded on exchanges, weather derivatives will fall within the scope of SFAS 133.

Soon thereafter, she got a position as a weather derivatives trader at Williams Cos. in Tulsa, Oklahoma.

Comey & Barrow, a London wine bar chain, was the first non-energy company in Britain to take out a weather derivative in 2000.

Enron Weather Risk Management (Weather Derivatives).

All written non-exchanged-traded option-based weather derivatives contracts should be carried at fair value with subsequent changes in fair value reported in current earnings.

To the Editor: As a participant in the four-year-old weather derivatives market, I was interested in "Forget About Efficient Markets.

If an investor in weather derivatives holds a lot of contracts written to European ice cream retailers, for example, and an unseasonably cold summer follows, the investor will suffer.