Towards a Blockchain Weather Derivative Financial Instrument for Hedging Volumetric Risks of Solar Power Producers

The weather-dependent nature of solar power makes Solar Power Producers susceptible to the unpredictability of sunshine. Temperature-based weather derivatives have recently emerged as an effective volumetric risk cross-hedge for Solar Power Producers, given that temperature positively correlates with solar radiation. Temperature-based put and call options, mostly traded on organized exchanges, require users to pay premiums that are costly and difficult to price. Swap contracts can serve as an economical alternative since they do not require premiums. However, they are only traded over-the-counter and are thus illiquid and liable to counterparty credit risks. For these reasons, a novel blockchain temperature-based weather derivative swap marketplace is proposed that mitigates the risks inherent in traditional swap contracts. The payoff structure and governing mechanisms of the smart contract that underpins this instrument are also developed. A preliminary investigation of this new financial instrument shows its efficacy in hedging volumetric risks of Solar Power Producers.

Towards a Blockchain Weather Derivative Financial Instrument for Hedging Volumetric Risks of Solar Power Producers

The weather-dependent nature of solar power makes Solar Power Producers susceptible to the unpredictability of sunshine. Temperature-based weather derivatives have recently emerged as an effective volumetric risk cross-hedge for Solar Power Producers, given that temperature positively correlates with solar radiation. Temperature-based put and call options, mostly traded on organized exchanges, require users to pay premiums that are costly and difficult to price. Swap contracts can serve as an economical alternative since they do not require premiums. However, they are only traded over-the-counter and are thus illiquid and liable to counterparty credit risks. For these reasons, a novel blockchain temperature-based weather derivative swap marketplace is proposed that mitigates the risks inherent in traditional swap contracts. The payoff structure and governing mechanisms of the smart contract that underpins this instrument are also developed. A preliminary investigation of this new financial instrument shows its efficacy in hedging volumetric risks of Solar Power Producers.

Creating a market for price swaps: Case study of an innovative risk management instrument in the Belgian-Dutch pear market

While the benefits of using futures to manage price risk are widely recognised, only certain groups of farmers have suitable futures at their disposal. This paper discusses an innovative instrument, developed in the Belgian-Dutch pear market, that provides an alternative to futures markets by creating a market for price swaps. Thus, the instrument provides some benefits of market-traded derivatives (like futures) while remaining a relatively simple instrument, which requires fewer market transactions. The paper describes key properties of the swap contracts and the platform used to trade them. In addition, it compares the conditions required for establishing price swap markets and futures markets. Thus, our study informs the design of similar risk management instruments for commodities and contexts where futures are absent.

Analisa Transaksi Spot, Forward dan Swap Sebagai Alat Pengendalian Risiko

Risk control is an important step and determines overall risk management. The known risks and their potential consequences must be managed appropriately, effectively, and accordingly company. Risk control is also necessary when foreign exchange transactions are due to currency fluctuations and foreign exchange differences. The exchange rate difference can be obtained from spot, forward and swap transactions we get from spot, forward and swap transactions. The purpose of this research is as follows: 1. To know the procedure of Spot, Forward and Swap foreign exchange transaction at X bank,2. To know the risk control in foreign currency transactions at X bank, 3. To know the analysis of spot, forward and swap transactions as risk control tools at X bank. The research method used in this research is Research Methods Quantitative Descriptive Analysis. With this method facilitate the author in analyzing data from the results described by the author.The results show: spot transactions, certainly will avoid the risk of exchange rate fluctuations because the bank will directly benefit from the spot transactions. And using forward and swap transactions must still be done because to avoid the risk of unexpected exchange rate fluctuations, although there are some larger transactions than forward and swap contracts but negotiations can be done together. Keywords: spot, forward, swap, risk control

Walutowe i procentowe transakcje zamiany - podstawy mechanizmu działania

This article describes the derivatives OTC market in Poland. The reports of the National Bank of Poland and literature review form the base for the analysis. The main objectives are to identify principal derivatives of the Polish OTC market after 2004 and explain the purpose of swap contracts. The principle conclusion of the article states that after 2004 Polish OTC market was still developing and that main financial instruments traded on this market are currency swaps, IRS and CIRS.