How to make hay while the sun shines...or doesn't

Weather trading is seeing strong volume growth in the US, largely due to the influx of hedge funds into the market. Why such a big increase in interest, and what sort of strategies are funds adopting?

When weather-risk veterans Mark Tawney and Bill Windle left global reinsurer Swiss Re in early July, it sent ripples around the small but fast-growing weather derivatives market.

And the fact that they left one of the largest weather-trading houses to set up a hedge fund reflects the market's buoyancy.

Weather-trading volumes have started to pick up since September 2004, particularly in the past couple of months. It is hedge funds that are helping to fill the trading gap left by merchant energy

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