Financial Innovations Designed to Mitigate Climate Risks

Authors

  • Gheorghe Hurduzeu The Bucharest University of Economic Studies
  • Maria Floriana Popescu The Bucharest University of Economic Studies

Keywords:

Climate Change, Climatic Risk, Derivative Instruments, Financial Innovations, Selyaninov Index

Abstract

This research paper aims to build a mechanism suitable for hedging the climatic risks by using financial innovations. The research starts from the premise that the climatic changes during the past years have had a significant impact on the level of agricultural production, cost, prices, and income stability both at the level of agricultural exploitations but also the economic indices at macroeconomic level. Then, following a risk management evaluation, we propose the establishment of a portfolio of indices on the evolution of the meteorological events (rain and temperature). Based on these indices there can be drawn the standardized elements of a contract for derivatives used as alternative mechanisms for the transfer of the agro-climatic risks. The understanding of the weather risks and the exposure to such risks has undergone a growth in complexity, aiming for a proactive risk management strategy for all the players in the agricultural field affected by climate change.

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Published

2015-10-01

How to Cite

Hurduzeu, G., & Popescu, M. F. (2015). Financial Innovations Designed to Mitigate Climate Risks. International Journal of Economic Practices and Theories, 5(5), 470-477. Retrieved from http://cyberknowledgeclub.org/index.php/ijept/article/view/Financial_Innovations_Designed_to_Mitigate_Climate_Risks