Weather Derivatives as a New Instrument
|Author:||Mgr. David Bracháček|
|Year:||2005 - winter|
|Leaders:|| prof. Ing. Michal Mejstřík CSc.
|Work type:|| Finance and Banking
|Awards and prizes:|
|Abstract:||This paper focuses on the analysis of the impact of weather on potential profits in Czech gas industry. The weather is quantified with several aspects. Temperature and eventual impact of the wind is taken into the consideration. The paper shows, what is the impact of the temperature swings during the year on the income of the organization.
The impact of concrete time periods is examined in detail. The consumption differs, ceteris paribus, during working days, during holidays, during weekends and also during the very specific last week in the year, where there is the time between two holidays.
For the paper, data from Czech central gas dispatching are used. They were consulted also with data directly from the Transgas company that is the main distributor of the gas in the Czech Republic. Data are usually taken from years 1996-2003.
In the end of the paper there is a description of the current condition of the weather derivative market and there is a possible hedging example.
The conclusion of the paper is rather to search in own options and for example do customer segmentation than to rely on the immature market.