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Benedicte Gravrand, Geneva: The term ‘weather’ is certainly used a lot in the investment world these days, as investors have to ‘weather’ the volatile environment. But for the real thing, quite a few large financial houses such as Merrill Lynch, Morgan Stanley, UBS now employ meteorologists for the trading edge that they provide. Hedge funds are also getting into the game and they should – weather derivatives are perfect hedging vehicles. James Hulse, fund manager at London-based weather hedge fund house PCE, talked to Opalesque about his unique funds.
According to Reuters, the $45-billion-plus weather derivatives market allows businesses as diverse as ski resorts to utilities and clothes makers to use swaps and options to hedge themselves against the impact of extreme temperatures or damaging winds. Hedge funds and pensions funds are also entering this market (Reuters.com).
Weather has been a tradable commodity for a few years
Weather derivatives make weather a tradable commodity and offer companies protection against weather-related risks – not the high-risk, low probability weather risk, which would be covered by insurance, but the low-risk, high probability risk, which still affect a good part of most economies (well over 20%) directly and the ...................... To view our full article Click here
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