Feasibility Study On The Implementation Of Weather Derivatives In China

In the information technology is so advanced today,the weather is still difficult to grasp and control.With the rapid development of various industries,people's awareness of risk increasing,how to avoid and disperse weather risk has become the urgent problem to solve for the weather risk,in addition to the traditional sense of disaster prevention and reduction,there is no way to change this situation? As of last century,the late 90 s weather derivatives,as a new way of risk management,become an excellent tool for dispersing and avoiding weather risk.With the development of weather derivatives in foreign countries,Chinese investors began to pay attention to this emerging derivatives,strong market demand makes our implementation of weather derivatives is imperative.In this paper,firstly the related theory of weather derivatives were analyzed and summarized,including the current weather risk situation and coping strategies,and compare the weather derivatives and weather insurance and traditional financial derivatives,pave the way for the following research.This article mainly from theory and practice two aspects of research and analysis in our country weather derivatives the feasibility of the theoretical analysis on the feasibility of implementing weather derivatives in China,this paper first introduces the current status of domestic and international weather derivatives market development and the need to address the problem of China's implementation of weather derivatives,then utilize the PEST analysis method,from the political,economic Four aspects,society,technical feasibility analysis of China's current implementation of weather derivatives research.After analyzing the feasibility of the implementation of weather derivatives in China,this article from the selection of subject matter of contract,design contract,contract pricing and the specific application of the four aspects of analysis.This paper explains the heating index,refrigeration and other 5 kinds of weather index index,combined with the current more mature international Chicago commodity exchange(CME)weather derivatives contracts,from the underlying index,contract specifications,subject to city,trading patterns and other factors,designed for China's weather in futures contracts.The pricing of weather derivatives,this article has introduced four kinds of pricing methods: Monte Carlo simulation pricing method,the mean reversion model of pricing,pricing and combustion analysis of Cao and Wei pricing model,and simulate the pricing pricing on temperature index futures and options using Monte Carlo.After the weather derivative Analysis of product contract design and pricing,shows that China is in contract design and pricing of weather derivatives does not exist on the problem.Finally,a power company as an example to clarify the operation mechanism of the use of hedging hedging weather derivatives,that the use of weather derivatives in the real economy is feasible.Through the study of this paper draws the following conclusions: weather derivatives is a new product with the development of the financial market,for the industry weather risk management plays an important role,it appears a great extent to meet investor demand to avoid and disperse weather risk tools.Combined with China's current economic and financial market situation,in the analysis of macro economy the theoretical and practical analysis on the real economy has launched the feasibility.So our country in the introduction of weather derivatives use has the advantage,and gradually improve the development of the financial derivatives of China health products market,the weather derivatives in China has been successfully introduced in a better environment.