Swiss Re signed up with New York-based risk management software firm Longitude today, to help its development of new weather risk management products.The Swiss reinsurer will use Longitude's Parimutuel Digital Call Auction (PDCA) technology in a bid to improve weather derivatives liquidity and transparency for market participants. Derivatives based on measures of temperature and precipitation, initially based on the US market, will be marketed towards utilities, reinsurers and insurers, said Swiss Re. “This initiative is consistent with our strategy to focus and leverage our risk capacity to create more overall liquidity in the global weather markets,” said Frank Caifa, associate director on Swiss Re's weather trading desk. “Longitude's technology and these new products, along with our new strategic initiative in trading, can have an enormous impact on the weather derivatives market.”
Caifa believes the PDCA technology, which establishes auctions for buyers and sellers of contracts, will generate narrower spreads than are currently available in the over-the-counter market. This is aimed at encouraging more firms to become involved in trading weather risk.
Longitude claimed PDCA allows financial intermediaries to provide derivatives and risk management products without assuming the market risks customarily associated with the facilitation of risk transfer.
“Swiss Re is a major force in risk transfer and the weather markets, and it is an ideal partner for the development of these new products,” said Andrew Lawrence, chief executive of Longitude.
Topics: Swiss Re
More on Structured Products
Controversial tax reforms would foist “unworkable” compliance burdens on firms
Product aims to improve on PowerShares S&P 500 Low Volatility Portfolio ETF using risk reduction
Conditional income product offers steady income and could offset potential bear market losses
Product offers 17% maximum return but investors’ capital is protected
Sign up for Risk.net email alerts
Sanjay Sharma talks about risk transparency and how his book helps achieve it.
A five-minute formula from Alexander Denev that takes you through a simple probabilistic graphical model and explains how and why these are used. Find out more about the ground-breaking book, Probabilistic...
Industry leader Vincent Kaminski discusses the challenges faced by energy markets and his new book, Managing Energy Price Risk, 4th Edition.
Momtchil Pojarliev talks about his book, The Role of Currency in Institutional Portolios, currency investing and the potential role of currencies in institutional portfolios.
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.