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A Market for Weather Risk ? Conflicting Metrics, Attempts at Compromise and Limits to Commensuration

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  • Isabelle Huault

    ()
    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)

  • Hélène Rainelli-Weiss

    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)

Abstract

In this paper, we examine the process of risk commodification involved in the creation of a market for weather derivatives in Europe. We approach this issue through an in-depth qualitative study in which we focus on the commensuration process by which promoters try to draw weather risk into the financial world. By offering a concrete description of a derivatives market as a meeting place between different metrics, our results highlight the failure of a process of commensuration - a phenomenon rarely studied empirically in the literature - and its unexpected results. Compared to existing research, we use the theoretical framework provided by Boltanski and Thévenot (2006) to enrich the literature on commensuration specifically as regards the different forms of agreement to which commensuration attempts can lead. Our results highlight the crucial role of a common interest for commensuration to succeed, and the conditions necessary for this common interest to occur. We conclude that there are limits to the thesis of financial theory, according to which all kinds of risk can be transformed into financial risk, and exchanged on financial markets.

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Paper provided by HAL in its series Post-Print with number halshs-00637068.

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Date of creation: 2011
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Publication status: Published, Organization Studies, 2011, 32, 10, 1395-1419
Handle: RePEc:hal:journl:halshs-00637068

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Keywords: commensuration; compromise; derivatives market; risk commodification; social studies of finance;

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  1. Daniel Beunza & David Stark, 2004. "Tools of the trade: the socio-technology of arbitrage in a Wall Street trading room," Industrial and Corporate Change, Oxford University Press, vol. 13(2), pages 369-400, April.
  2. Rainelli, Hélène & Huault, Isabelle, 2009. "Market shaping as an answer to ambiguities. The case of credit derivatives," Economics Papers from University Paris Dauphine 123456789/263, Paris Dauphine University.
  3. Emiliano Grossman & Emilio Luque & Fabian Muniesa, 2006. "Economies through transparency," CSI Working Papers Series 003, Centre de Sociologie de l'Innovation (CSI), Mines ParisTech.
  4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, American Finance Association, vol. 7(1), pages 77-91, 03.
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Cited by:
  1. Isabelle Bouty & Marie-Léandre Gomez & Carole Drucker-Godard, 2013. "Maintaining an Institution : The Institutional Work of Michelin in Haute Cuisine around the World," Post-Print, HAL hal-00782455, HAL.
  2. Bouty, Isabelle & Gomez, Marie-Léandre & Drucker-Godard, Carole, 2013. "Maintaining an Institution: the institutional work of Michelin in haute cuisine around the world," ESSEC Working Papers, ESSEC Research Center, ESSEC Business School WP1302, ESSEC Research Center, ESSEC Business School.
  3. Huault, Isabelle & Taupin, Benjamin, 2012. "Les fondements moraux d’une logique institutionnelle. Contestation, controverses et stabilité," Economics Papers from University Paris Dauphine 123456789/9544, Paris Dauphine University.
  4. Isabelle Huault & Hélène Rainelli-Weiss, 2013. "Is transparency a value on OTC markets? Using displacement to escape categorization," Working Papers halshs-00927090, HAL.

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