
Heineken seeks rainy day hedge
According to a market participant, who declined to be named, the success of Heineken’s highly specific and individual contract will be a key test for the development of weather derivatives. “The news that Heineken is looking to hedge its weather risk is encouraging,” said the source. “But the problem is that there is no company that would be a natural source for the other side of this type of contract. Who benefits from rainy Saturdays?”
According to the source, this may limit the potential growth of business, as traders would not merely be acting as market intermediaries, but could be acting more like an insurance firm.
“If the use of weather derivatives is truly going to grow, then this sort of weather risk contract is going to have to be successful,” said the source.
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