文档介绍：Insurance, Weather, and Energy Derivatives
Chapter 29
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Weather Derivatives: Definitions
Heating degree days (HDD): For each day this is max(0, 65 – A) where A is the average of the highest and lowest temperature in ºF.
Cooling Degree Days (CDD): For each day this is max(0, A – 65)
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Weather Derivatives: Products
A typical product is a forward contract or an option on the cumulative CDD or HDD during a month
Weather derivatives are often used by panies to hedge the volume of energy required for heating or cooling during a particular month
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Energy Derivatives
Main energy sources:
Oil
Gas
Electricity
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Oil Derivatives
Virtually all derivatives available on stocks and stock indices are also available in the OTC market with oil as the underlying asset
Futures and futures options traded on the New York Mercantile Exchange (NYMEX) and the International Petroleum Exchange (IPE) are also popular
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Natural Gas Derivatives
A typical OTC contract is for the delivery of a specified amount of natural gas at a roughly uniform rate to specified location during a month.
NYMEX and IPE trade contracts that require delivery of 10,000 million British thermal units of natural gas to a specified location
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Electricity Derivatives
Electricity is an modity in that it cannot be stored
The is divided into about 140 control areas and a market for electricity is created by trading between control areas.
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Electricity Derivatives continued
A typical contract allows one side to receive a specified number of megawat