Date Available
7-31-2013
Year of Publication
2013
Document Type
Doctoral Dissertation
Degree Name
Doctor of Philosophy (PhD)
College
Agriculture
Department/School/Program
Agricultural Economics
Advisor
Dr. Jerry Skees
Co-Director of Graduate Studies
Dr. Wuyang Hu
Abstract
This dissertation provides the analysis necessary to launch the first direct climate markets. Combining statistical modeling with qualitative interviews, I build off of an innovative insurance project to show why and how to start traded markets on indexes of El Niño/La Niña. I provide statistical models of El Niño/La Niña's worldwide economic impacts; a stochastic catalog used to price virtually any risk management contract on El Niño/La Niña, even as new forecasts change traders' expectations; a comprehensive statistical description of the lifecycle of new derivatives showing how the prospects for new derivatives changed fundamentally in the last decade (this work is co-authored by Michael Penick, Senior Economist at the US government's derivatives regulator, the Commodity Futures Trading Commission); and, interviews with risk management professionals at businesses facing El Niño/La Niña risk and financial firms interested in trading that risk. Based on this analysis, I conclude that catastrophe bonds settling on NOAA's Niño 3.4 sea surface temperatures can, and likely will, launch in the near future.
Recommended Citation
Cavanaugh, Grant, "Direct Climate Markets: the Prospects for Trading Teleconnection Risk" (2013). Theses and Dissertations--Agricultural Economics. 16.
https://uknowledge.uky.edu/agecon_etds/16
