29.1 Insurance, Weather, and Energy derivatives Chapter 29 Options, Futures, and other Derivatives, 5th edition 2002 by John C. Hull
Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 29.1 Insurance, Weather, and Energy Derivatives Chapter 29
292 Weather derivatives: Definitions Heating degree days(HDD): For each day this is max(0, 65- a)where A is the average of the highest and lowest temperature in°F Cooling Degree Days(CDD): For each day this is max(o, A-65 Options, Futures, and other Derivatives, 5th edition 2002 by John C. Hull
Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 29.2 Weather Derivatives: Definitions • Heating degree days (HDD): For each day this is max(0, 65 – A) where A is the average of the highest and lowest temperature in ºF. • Cooling Degree Days (CDD): For each day this is max(0, A – 65)
29.3 Weather derivatives: products a typical product is a forward contract or an option on the cumulative Cdd or Hdd during a month Weather derivatives are often used by energy companies to hedge the volume of energy required for heating or cooling during a particular month Options, Futures, and other Derivatives, 5th edition 2002 by John C. Hull
Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 29.3 Weather Derivatives: Products • A typical product is a forward contract or an option on the cumulative CDD or HDD during a month • Weather derivatives are often used by energy companies to hedge the volume of energy required for heating or cooling during a particular month
29.4 Energy Derivatives Main energy sources Oil Gas Electricity Options, Futures, and other Derivatives, 5th edition 2002 by John C. Hull
Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 29.4 Energy Derivatives Main energy sources: • Oil • Gas • Electricity
29.5 Oil Derivatives Virtually all derivatives available on stocks and stock indices are also available in the OTC market with oil as the underlying asset Futures and futures options traded on the New York Mercantile EXchange(NYMEX)and the International Petroleum EXchange(IPE) are also popular Options, Futures, and other Derivatives, 5th edition 2002 by John C. Hull
Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 29.5 Oil Derivatives • Virtually all derivatives available on stocks and stock indices are also available in the OTC market with oil as the underlying asset • Futures and futures options traded on the New York Mercantile Exchange (NYMEX) and the International Petroleum Exchange (IPE) are also popular