Index Investing: From Theory to Practice · Dr MAI Huu Minh, TRAN Phan Bao Ngoc & HUYNH Nguyen Quoc BuuChapter 27 of 37 · Module 7: Latest index trends and innovations
CHAPTER 27
Climate Risk, Weather and Catastrophe Indexes
Measuring physical climate risk: temperature, weather derivatives, cat bonds and climate-risk scores
Opening question
“My coffee farm in Dak Lak lost half its crop to drought, and my insurer took months to send an assessor. A friend says some farmers are paid automatically when the rain gauge falls below a level. How can an index pay for a drought?”
In this chapter
- The difference between transition risk and physical risk
- Global temperature series and indexes of climate extremes, vulnerability and loss
- Degree days, the formula behind weather derivatives, and the CME weather market
- Rainfall and parametric insurance, with a worked example from Vietnam
- Catastrophe bonds and the indexes that track them
- Physical climate-risk scores inside equity indexes, and the clean-energy boom and bust
- The hard parts: data, models, scenarios and basis risk
- What a Vietnamese climate-risk index could measure
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 27 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Index Investing: From Theory to Practice (Volume 1, NXW Investment Library).
Read Chapter 1 freeGet the full book — contact@nxw.vnSections of this chapter
27.1 Two kinds of climate risk
27.2 Climate data indexes: measuring the warming
27.3 Indexes of extremes, vulnerability and loss
27.4 Weather indexes: degree days and the weather market
27.5 Rainfall and parametric insurance
27.6 Catastrophe bonds and cat bond indexes
27.7 Climate-risk scores in equity indexes
27.8 Building climate-risk indexes: data, models, scenarios and basis risk
27.9 Asia and Vietnam
27.10 A checklist for any climate-risk or weather index