Weather indexes, index insurance and weather index futures
Item and associated files
Author
Pu, Chengyi See all items with this value
Chen, Yueyun (Bill) See all items with this value
Pan, Xiaojun See all items with this value
Journal
Date
2018
Volume
9
Pages
32-40
ISSN
2616-3551 See all items with this value
e-ISSN
2522-9591 See all items with this value
Abstract
This paper compares the weather insurance, weather index insurance and index futures and focuses on why China needs to develop weather indexes and adopt and trade weather index futures. It further discusses how to construct the indexes and futures and how to price them.
Different from the Heating Degree Days (HDDs) and Cooling Degree Days (CDDs) used at Chicago Mercantile Exchange (CME), it develops the Extremely Heating Days (EHDs) and Extremely Cooling Days (ECDs) to derive relevant temperature-based weather index futures.
Recently China has started using weather index insurance to cover farmers' risk. Through comparisons of weather index futures with index insurance, this study shows the necessity and importance of using the weather index futures to better protect farmers and better develop China's financial markets.
Different from the Heating Degree Days (HDDs) and Cooling Degree Days (CDDs) used at Chicago Mercantile Exchange (CME), it develops the Extremely Heating Days (EHDs) and Extremely Cooling Days (ECDs) to derive relevant temperature-based weather index futures.
Recently China has started using weather index insurance to cover farmers' risk. Through comparisons of weather index futures with index insurance, this study shows the necessity and importance of using the weather index futures to better protect farmers and better develop China's financial markets.