european weather derivatives 1 
EUROPEAN WEATHER
DERIVATIVES
This paper concentrates on where the future of the weather derivatives market may lie, where the new applications may be situated and what will be the main drivers of the market size. We realise that some of the applications are not currently available or commercially viable at present but take the view that, if demand is sufficient, they will become available given time. In fact, one of the likely drivers of demand is the rate of change in the European climate. To this extent we have included a chunky appendix summarising the latest findings and views on climate change as we believe that this will have a huge influence on where the weather derivative market in Europe will be in 5-10 years time.
WORKING PARTY MEMBERS
Nick Buckley
Alex Hamilton
Justyn Harding
Nicola Roche
Nick Ross (chairman)
Emma Sands
Richard Skelding
Nick Watford
Heidi Whitlow
Special Thanks to: Jeff Sayers
Contents
Section
1.
Introduction to this paper and Summary of Previous Paper
2.
Current Market Conditions
3.
Case Study
4.
Broker Survey
5.
Underlying Measures
6.
Climate Change
7.
Weather Derivatives vs other types of risk management
8.
Acknowledgements
Appendix A
Climate Change
1.
Introduction to this paper and Summary of Previous Paper
1.1
Introduction
Welcome! It has been great fun pulling this paper together, for most of the team weather derivatives is an area we rarely touch on during our day to day work. We have all therefore learnt a great deal from writing this paper and I hope that everyone who reads it will also learn something.
The main theme of last year's paper was to set the current scene in the weather derivative market. It covered the current market conditions, recent trades, the recent growth in the market and pricing techniques (among other topics). Rather than develop this further in our paper, we chose to concentrate on where the future of the weather derivatives market may lie, where the new applications may be
DERIVATIVES
This paper concentrates on where the future of the weather derivatives market may lie, where the new applications may be situated and what will be the main drivers of the market size. We realise that some of the applications are not currently available or commercially viable at present but take the view that, if demand is sufficient, they will become available given time. In fact, one of the likely drivers of demand is the rate of change in the European climate. To this extent we have included a chunky appendix summarising the latest findings and views on climate change as we believe that this will have a huge influence on where the weather derivative market in Europe will be in 5-10 years time.
WORKING PARTY MEMBERS
Nick Buckley
Alex Hamilton
Justyn Harding
Nicola Roche
Nick Ross (chairman)
Emma Sands
Richard Skelding
Nick Watford
Heidi Whitlow
Special Thanks to: Jeff Sayers
Contents
Section
1.
Introduction to this paper and Summary of Previous Paper
2.
Current Market Conditions
3.
Case Study
4.
Broker Survey
5.
Underlying Measures
6.
Climate Change
7.
Weather Derivatives vs other types of risk management
8.
Acknowledgements
Appendix A
Climate Change
1.
Introduction to this paper and Summary of Previous Paper
1.1
Introduction
Welcome! It has been great fun pulling this paper together, for most of the team weather derivatives is an area we rarely touch on during our day to day work. We have all therefore learnt a great deal from writing this paper and I hope that everyone who reads it will also learn something.
The main theme of last year's paper was to set the current scene in the weather derivative market. It covered the current market conditions, recent trades, the recent growth in the market and pricing techniques (among other topics). Rather than develop this further in our paper, we chose to concentrate on where the future of the weather derivatives market may lie, where the new applications may be