A Market for Weather Risk ? Conflicting Metrics, Attempts at Compromise and Limits to Commensuration
AbstractIn 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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Bibliographic InfoPaper provided by HAL in its series Post-Print with number halshs-00637068.
Date of creation: 2011
Date of revision:
Publication status: Published, Organization Studies, 2011, 32, 10, 1395-1419
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commensuration; compromise; derivatives market; risk commodification; social studies of finance;
Other versions of this item:
- Huault, Isabelle & Rainelli, Hélène, 2011. "A Market for Weather Risk ? Conflicting Metrics, Attempts at Compromise and Limits to Commensuration," Economics Papers from University Paris Dauphine 123456789/7506, Paris Dauphine University.
- Huault, Isabelle & Rainelli, Hélène, 2010. "A Market for Weather Risk ? Conflicting Metrics, Attempts at Compromise and Limits to Commensuration," Economics Papers from University Paris Dauphine 123456789/8602, Paris Dauphine University.
- N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-02-27 (Agricultural Economics)
- NEP-ALL-2012-02-27 (All new papers)
- NEP-RMG-2012-02-27 (Risk Management)
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