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Using Options Futures Derivatives Weather in Hedging

Author

Listed:
  • Mohammed Faez Hasan

    (Dept. of Financial & Banking sciences, University of Kerbala, Iraq)

  • Noor Salah Abdelnaby Al-Ramadan

    (Dept. of Financial & Banking sciences, University of Kerbala, Iraq)

Abstract

The present investigation is taken into consideration on using options futures derivatives weather in hedging. A weather derivative is considered as the financial instrument that people or firms use to protect themselves from the threat of weather-related losses. In exchange for a premium, the seller of a weather variant concurs to assume the risk of disasters. Weather hedges are regarded as the financial instrument used by businesses or individuals to limit the risk of weather loss. There have been different articles considered based on the given subject area. The findings stated that heating degree days is one climate index for weather derivatives. Each day that the daily average temperature tends to fall under a predefined reference point over a specified time, the deviation amount is recorded as well as decided to add to an accumulated count under HDD agreements. From the above-mentioned information, it has been concluded that there are numerous obstacles to making effective use of and managing weather options. Risk managers should understand options, as well as the risk profile related to the purchase of weather options about their company, can find weather derivatives extremely useful. Adding weather possibilities to the Value at Risk (VAR) calculation is a simple process.

Suggested Citation

  • Mohammed Faez Hasan & Noor Salah Abdelnaby Al-Ramadan, 2022. "Using Options Futures Derivatives Weather in Hedging," Technium Social Sciences Journal, Technium Science, vol. 31(1), pages 430-436, May.
    • Handle: RePEc:tec:journl:v:31:y:2022:i:1:p:430-436
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    References listed on IDEAS

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    2. Matsumoto, Takuji & Yamada, Yuji, 2021. "Simultaneous hedging strategy for price and volume risks in electricity businesses using energy and weather derivatives1," Energy Economics, Elsevier, vol. 95(C).
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    4. Kometsi Kotlele & E. I. Edoun & Vinessa Naidoo, 2021. "An assessment of interest rates on high income earners in South Africa," Technium Social Sciences Journal, Technium Science, vol. 26(1), pages 1-16, Decembrie.
    5. Samuel Asante Gyamerah & Philip Ngare & Dennis Ikpe, 2019. "Hedging crop yields against weather uncertainties -- a weather derivative perspective," Papers 1905.07546, arXiv.org, revised Aug 2019.
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    Cited by:

    1. Entidhar Lateef Abdoun, 2023. "The Buy and Hold Investment Strategy: Building and Evaluating Passive Portfolios from Iraq Stock Exchange," Technium Business and Management, Technium Science, vol. 5(1), pages 79-87.
    2. Hawra Thamer Mahdi & Fatima Abid Ali Salman & Nagham Dayek Abd Ali & Mohammed Faez Hasan, 2023. "Effect of Interactive Marketing Dimensions on Marketing Efficiency: Exploratory Study for the Opinions of a Sample of Employees of AsiaCell Mobile Telecommunications Company in Karbala City," Technium Social Sciences Journal, Technium Science, vol. 43(1), pages 344-359, May.
    3. Mustafa Hashim Hasan, 2023. "Banking capitalization strategy and its impact on enhancing its digital transformations," Technium Business and Management, Technium Science, vol. 6(1), pages 49-57.
    4. Angelos Prentzas & Thomas Bournaris & Stefanos Nastis & Christina Moulogianni & George Vlontzos, 2024. "Enhancing Sustainability through Weather Derivative Option Contracts: A Risk Management Tool in Greek Agriculture," Sustainability, MDPI, vol. 16(17), pages 1-18, August.
    5. Mohammed Jasim Mohammed AL Abdullah & Ahmed Abd Alkareem Mohammed Alyaseen & Mohammed Faez Hasan, 2023. "Role of Company's Efficiency Measure in achieving return: Iraq's Private Banks Case," Technium Social Sciences Journal, Technium Science, vol. 39(1), pages 377-392, January.
    6. Alaa Hussein Fadhil & Ahmed Abdullah Amanah & Sahar Abbas Hussein & Mohammed Faez Hasan & Ghaith Saadi Mohammed Ali & Ihab Zeyad Mohammed, 2023. "Impact of Behavioural Integration of Senior Management in Effectiveness of Strategic Decision-Making: An Applied Study in Some Iraqi Private Faculties in Kerbala City," Technium Social Sciences Journal, Technium Science, vol. 43(1), pages 371-388, May.

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    More about this item

    Keywords

    Weather variant; derivatives; Weather derivative and Hedging;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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