Hedging El Nino and La Nina via Weather Derivatives
Antony Stace
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El Nino and La Nina can be measured a few different ways, one of them is by the Oceanic Ni?o Index (ONI). El Nino is when this index is above 0.5 and La Nina when it is below -0.5. Below is the ONI for Jan-Feb-Mar going back in time. Those with financial exposure to the ONI could use a hedge such as a call, put, or swap on the ONI to hedge their exposure.
A hedge against a high ONI (El Nino) might be something based on
Notional * max(Realised_ONI_JFM - K, 0)
and for a low ONI (La Nina)
Notional * max(K - Realised_ONI_JFM, 0)
Please reach out to me if you are interested in what might be possible.
https://origin.cpc.ncep.noaa.gov/products/analysis_monitoring/ensostuff/ONI_v5.php
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3 年Narasimha Rao Nalamasu This might be insightful.