Thanks to Larry Croft for us this…
Climate change provides rise to weather hedge
By Paul J Davies
April 24, 2007
Financial Times
The first Global Warming index is to be launched this week by UBS, allowing businesses most affected by the uncertainty of climate change – from ice-cream salesmen to makers of winter coats – to hedge their profits against it in a simple and transparent fashion.
Retail and institutional investors will also be able to buy exposure to, or short sell, the index in much the same way they would with the FTSE or Dow Jones stock indices. If temperatures rise, so will the value of the index.
Ilija Murisic, executive director of hybrid derivatives trading at UBS, said the impact of global warming had brought explosive growth in the weather derivatives market…
“Global warming has created much more volatility in temperatures and weather conditions, which has led to increased liquidity in the weather derivatives market,” Mr Murisic said…
UBS hopes the index will turn the complex business of investing in the world’s weather into a popular asset class, one that is entirely uncorrelated with returns in other assets such as stocks or bonds.
Read the whole article at ft.com
© The Financial Times Limited 2007