Survey Design and Implementation (2)

1
Survey Design and Implementation (2)
Geographic Regions Where Weather Events are
Measured Asia Australian Continent Europe North
America, West North America, Midwest North
America, East North America, South Other

• Source Weather Risk Management Association
  Annual Survey (2002)

2
Participation of 20 players
Participation by Main Line of Business Agricultur
e 1 Banking 4 Energy 10 Insurance 5 Other - P
articipation by Location of Respondent Asia 5 Eu
rope 5 North America 10 Other -

• Source Weather Risk Management Association
  Annual Survey (2002)

3
2002 Survey, General Results

• Overall, number of contracts and notional value
  higher
• Results vary by season
• Number of Winter contracts (October April) rose
• Number of Summer contracts (April October) fell
• Increasing variation in type and location of
  contracts

• Source Weather Risk Management Association
  Annual Survey (2002)

4
Survey Results, Total Number of Contracts
3,397
2,759
1,285
695

• Source Weather Risk Management Association
  Annual Survey (2002)

5
Survey Results, Total Notional Value
4,306
2,959
2,517
1,836

• Source Weather Risk Management Association
  Annual Survey (2002)

6
Survey Results, Average Notional Value by Type of
Contract

• Source Weather Risk Management Association
  Annual Survey (2002)

7
Survey Results, Average Notional Value

• Source Weather Risk Management Association
  Annual Survey (2002)

8
Survey Results, Average Notional Value by Region

• Source Weather Risk Management Association
  Annual Survey (2002)

9
Survey Results, Number of Contracts by Type

• Source Weather Risk Management Association
  Annual Survey (2002)

10
Survey Results, Notional Value by Type

• Source Weather Risk Management Association
  Annual Survey (2002)

11
Survey Results, Number of Contracts by Region

• Source Weather Risk Management Association
  Annual Survey (2002)

12
Survey Results, Notional Value by Region

• Source Weather Risk Management Association
  Annual Survey (2002)

13
Survey Results, Share of Counterparties Not
Participating in Survey

• Source Weather Risk Management Association
  Annual Survey (2002)

14
Survey Results, Share of Counterparties Not
Participating in Survey

• Source Weather Risk Management Association
  Annual Survey (2002)

15
Diversification of the weather market

• Another significant development is the
  diversification of the types of contracts that
  were transacted.
• Temperature-related protection (for heat and
  cold) continues to be the most prevalent, making
  up over 82 percent of all contracts (92 last
  year)
• Rain-related contracts account for 6.9 (1.6
  last year), snow for 2.2 (0.6 last year) and
  wind for 0.4 (0.3 last year).
• Source Weather Risk Management Association
  Annual Survey (2002)

16
Concluding Remarks

• An empirical approach to the pricing of weather
  derivatives has been presented.
• The approach utilises a range of data types to
  price weather derivatives, including forecast
  accuracy data.
• Overview of the Weather Risk Management Survey
  2002 statistics have been presented.

17
The Noah Rule

• Predicting rain doesnt count
• Building arks does.
• Warren Buffett,
• Australian Financial Review,11 March 2002.

18
Email G.Dixon_at_mailbox.gu.edu
.au

• Energy Finance a Key Research Area for Griffith
  University in

• Financial Risk Management and Valuation Centre

19
Thankyou Ergon Energy from

• Dr Harvey Stern,
• Climate Manager, Victoria
• Homepage www.weather-climate.com
• and

Griffith University
Mr Glen Dixon, Associate Lecturer
(Finance),Brisbane
Homepagewww.acmc.uq.edu.au/gwd/EnergyExchange.ht
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