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Weather derivatives and hedging the weather risks

Author

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  • Josef TAUŠER

    (Department of International Trade, Faculty of International Relations, University of Economics, Prague, Czech Republic)

  • Radek ČAJKA

    (Department of International Trade, Faculty of International Relations, University of Economics, Prague, Czech Republic)

Abstract

The article focuses on weather derivatives with the aim to present the substance of weather derivatives as relatively new financial products and to discuss their advantages and disadvantages when being used as a tool to diminish the loses coming from these suboptimal weather conditions. We conclude with the findings that weather derivatives have a great potential to develop further. They provide an opportunity to hedge against the suboptimal weather conditions at reasonable costs. However, the hedging effectiveness is the main issue to be analyzed in each specific business case.

Suggested Citation

  • Josef TAUŠER & Radek ČAJKA, 2014. "Weather derivatives and hedging the weather risks," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(7), pages 309-313.
    • Handle: RePEc:caa:jnlage:v:60:y:2014:i:7:id:11-2014-agricecon
    DOI: 10.17221/11/2014-AGRICECON
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    References listed on IDEAS

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    1. Patrick L. Brockett & Mulong Wang & Chuanhou Yang, 2005. "Weather Derivatives and Weather Risk Management," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 8(1), pages 127-140, March.
    2. Ciumas Cristina & Botos Horia Mircea, 2011. "Weather Index- The Basis Of Weather Derivatives," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 362-369, July.
    3. Niels Pelka & Oliver Musshoff, 2013. "Hedging effectiveness of weather derivatives in arable farming – is there a need for mixed indices?," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 73(2), pages 358-372, July.
    4. Niels Pelka & Oliver Musshoff, 2013. "Hedging effectiveness of weather derivatives in arable farming – is there a need for mixed indices?," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 73(2), pages 358-372, July.
    5. Botos Horia Mircea, 2013. "Weather Derivatives: The Most Common Pricing And Valuation Methods," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 961-968, July.
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    Cited by:

    1. Waldemar BOJAR & Leszek KNOPIK & Jacek ŻARSKI & Renata KUŚMIEREK-TOMASZEWSKA, 2015. "Integrated assessment of crop productivity based on the food supply forecasting," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(11), pages 502-510.
    2. Ivana STULEC & Kristina PETLJAK & Tomislav BAKOVIC, 2016. "Effectiveness of weather derivatives as a hedge against the weather risk in agriculture," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 62(8), pages 356-362.
    3. Monika HARČARIKOVÁ, 2015. "Proposal of new outperformance certificates in agricultural market," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(9), pages 400-409.

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