Financial Engineering of Climate Uncertainty

The climatic condition influences and determines the various sectors in the economy. The emergence of weather derivatives in the financial market is the most palpable reflection of this reality. Derivative contracts climate use climate measures, analogous to the target asset for the pricing.

An institution that wishes to eliminate the risk of a given weather event, such as a period with little/excessive rain or temperature can purchase weather derivatives contracts, adjusting the unfavorable weather conditions to the estimated lost value and the return of the contracts.

4 selected articles from “The Journal of Finance” – February 2013

The last edition of The Journal of Finance [link] came with good articles, related to financial engineering and capital markets that I would appreciate to list.

The Journal of Finance, one of the most prestigious finance journals, was established on 1946. Is one of the most cited journals with distinguished articles like “Portfolio Selection” [link] – Henry Markowitz.

The selected articles are:

Financial Automation and Control: a new age.

Automation is the application of techniques that reduce human labor and maximize production with fewer costs. We can apply automation on every process that we wish to get done fast. On finance, the automation are on the algorithms that we see keeping and retrieving data, report summarizing, data-mining, etc. There´s no doubt that the need of automation is very large. That are so much things that we wish to be done in milliseconds, many simulations, analysis or data processing that we have to prioritize, since that the workforce is limited against the demands.