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

  • Huault, Isabelle
  • Rainelli, Hélène

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 Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/7506.

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Date of creation: Oct 2011
Date of revision:
Publication status: Published in Organization Studies, 2011, Vol. 32, no. 10. pp. 1395-1419.Length: 24 pages
Handle: RePEc:dau:papers:123456789/7506
Contact details of provider: Web page: http://www.dauphine.fr/en/welcome.html

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  1. Emiliano Grossman & Emilio Luque & Fabian Muniesa, 2006. "Economies through transparency," CSI Working Papers Series 003, Centre de Sociologie de l'Innovation (CSI), Mines ParisTech.
  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. 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.
  4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
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