The market allowed the utilities to sell weather futures
After Enron pancaked, weather futures stayed around--still mostly for utilities and farms--but buying them wasn't easy: You had to personally contact one of the few weather-futures traders who'd set up their own trading desks in the wake of Enron's dissolution.
It then uses that guess to instantly price a weather future or insurance contract.
Then in 1999, the Chicago Mercantile Exchange (CME) started to trade weather futures
contracts, spurring the expansion of this nascent sector.
while the hedger using linear basis hedging (hedging using the combination of exchange traded weather futures
and OTC basis weather forwards) has a final wealth given by
From the same people who run weather futures
trading, the hurricane futures market could prove to be a viable tool for reinsurers.
made their debut Wednesday on the Chicago Mercantile Exchange, enabling investors to speculate on what the temperature is going to be in four U.
Weather Forecasting Using Weather Futures
Presented by:Ben Smith, President, First Enercast Financial
Later in the same year, the London International Financial Futures Exchange introduced weather futures
that now allow Europeans to hedge against their respective weather conditions.
This capacity increased the open interest on the Chicago Mercantile Exchange (CME) by 588%, the largest-ever volume for a specific weather futures
contract in any one city on a given day.
He was there when the CME was growing the weather derivative market in its early years; he's launched three different types of weather indices and he has been one of the central figures in the growth of the weather futures
market," said David Riker, President and CEO of Storm Exchange.
According to the report, the Department of Commerce in May of 2000 recognized a portion of this danger and issued a memo prohibiting NWS employees from investing in weather futures
or weather derivatives.