Direct climate markets: The prospects for trading teleconnection risk.

摘要

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 Nina/La Nina. I provide statistical models of El Nina/La Nina's worldwide economic impacts; a stochastic catalog used to price virtually any risk management contract on El Nina/La Nina, 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 Nina/La Nina risk and financial firms interested in trading that risk. Based on this analysis, I conclude that catastrophe bonds settling on NOAA's Nina 3.4 sea surface temperatures can, and likely will, launch in the near future.