The contracts allow the leisure industry to hedge their exposure to the risk of cooler or warmer spring temperatures and the early or late blossoming of the country's cherry blossom trees, said the official.
“During the first of April, most Japanese enjoy watching cherry blossom [and] all across the nation they go to parks and restaurants outside," he said. "So if there’s a certain change in the weather, the leisure and restaurant business will be affected very much."
A typical contract pays out if the temperature exceeds a predetermined temperature for more than a pre-specified number of days during the contract's life between March and April. The premium price for an average contract is around ¥1,500,000 ($12,580), with a payout of ¥450,000 for each day the temperature breaches the strike beyond the pre-specified number of days.
The week on Risk.net, September 8-14, 2018Receive this by email