Ch22HullFundamentals6thEd

Ch22HullFundamentals6thEd - Weather, Energy, and Insurance...

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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 22.1 Weather, Energy, and Insurance Derivatives Chapter 22
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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 22.2 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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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 22.3 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 energy companies to hedge the volume of energy required for heating or cooling during a particular month
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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 22.4 Energy Derivatives Main energy sources: Oil Gas Electricity
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Ch22HullFundamentals6thEd - Weather, Energy, and Insurance...

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