Energy, variability and weather finance engineering

Karakatsanis, Georgios; Roussis, Dimitrios; Moustakis, Yiannis; Gournari, Panagiota; Parara, Iliana; Dimitriadis, Panayiotis; Koutsoyiannis, Demetris

doi:10.1016/j.egypro.2017.08.073

Cited by 8 publications

(3 citation statements)

References 11 publications

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“…The standardization and imprint of such measured outcomes in corporate and national accounting is expected to restructure patterns and trade networks in terms of comparative advantages, should the pricing of environmental goods be adopted as a universal corporate and national practice. Specifically for IS clusters that are assigned with large volumes of short-lived biodegradable VACs with high sensitivity and low tolerance levels against climate exposure (e.g., biomass energy), ChL schemes become significantly more complex with the utilization of weather derivatives [76] as instruments for hedging operational costs that are coupled to geophysical risks. 5, for N = 500 wastewater packages containing the VAC.…”

Section: Discussionmentioning

confidence: 99%

Chemical Leasing (Ch.L.) and the Sherwood Plot

Karakatsanis,

Makropoulos

2024

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Although the Circular Economy (CE) has made remarkable technological progress by offering a wide range of alternative engineering solutions, an obstacle for its large-scale commercialization is nested in the adoption of those business and financial models that accurately depict the value generated from resource recovery. Recovering a resource from a waste matrix conserves natural reserves in situ by reducing demand for virgin resources, as well as conserving environmental carrying capacities by reducing waste discharges. The standard business model for resource recovery is Industrial Symbiosis (IS), where industries organize in clusters and allocate the process of waste matrices to achieve the recovery of a valuable resource at an optimal cost. Our work develops a coherent microeconomic architecture of Chemical Leasing (Ch.L.) contracts within the analytical framework of the Sherwood Plot (SP) for recovering a Value-Added Compound (VAC) from a wastewater matrix. The SP depicts the relationship between the VAC’s dilution in the wastewater matrix and its cost of recovery. ChL is engineered on the SP as a financial contract, motivating industrial synergies for delivering the VAC at the target dilution level at the market’s minimum cost and with mutual profits. In this context, we develop a ChL market typology where information completeness on which industry is most cost-efficient in recovering a VAC at every dilution level determines market dominance via a Kullback–Leibler Divergence (DKL) metric. In turn, we model how payoffs are allocated between industries via three ChL contract pricing systems, their profitability limits, and their fitting potential by market type. Finally, we discuss the emerging applications of ChL financial engineering in relation to three vital pillars of resource recovery and natural capital conservation.

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Section: Discussionmentioning

confidence: 99%

Chemical Leasing (Ch.L.) and the Sherwood Plot

Karakatsanis,

Makropoulos

2024

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“…Taip pat turi būti nustatyta vieta, kurios oro sąlygos bus apibrėžiamos. Įprastai tai būna miestas, kurio orų išvestinėmis finansinėmis priemonėmis prekiaujama biržoje (Karaktsanis et al, 2017).…”

Section: Orų Išvestinių Finansinių Priemonių Savybėsunclassified

Application of Air Derivative Financial Instruments in Lithuanian Economy

Latvytė

Martinkutė-Kaulienė

2020

Science - Future of Lithuania

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The paper explores the concept of weather derivatives: what it is, what its features are, and in what areas they can be applied. It has been established that there can be several types of weather derivative instruments – options and swaps. The use of weather derivatives has also been found to be very broad and attractive for tourism, construction, agriculture and heating companies. Companies operating in Lithuania do not use weather derivatives, although they do provide insurance against the risks associated with adverse weather conditions. The paper is conducting a study to determine which heating companies should apply weather derivatives to improve their performance. The study is conducted using multi-criteria assessment methods – SAW and TOPSIS. The multi-criteria assessment showed that AB Šiaulių energija and UAB Varėnos šiluma could use the opportunity to apply weather derivatives in their activities.

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“…Although the Chicago Mercantile Exchange launched standardized weather contracts in 1999, their use is primarily in the energy market, with little application to agriculture. Non-standardized contracts traded in the over-the-counter market have seen very little uptake, particularly in agriculture (Roussis et al, 2017). Similarly, despite a number of studies modeling potential viticulture applications (Turvey, Weersink, and Chiang, 2006;Cyr and Kusy, 2007;Shaw, 2008, 2010;Zara, 2010;Yandell, 2012;Cortina and Sánchez, 2013), actual applications are rare at best.…”

Section: Introductionmentioning

confidence: 99%

Potential use of weather derivatives in hedging aggregate viticulture yields: An analysis of the Niagara region of Canada

Cyr,

Kushner,

Zhang

2023

J Wine Econ

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Although potentially useful for financially hedging systemic weather-related risks, weather contracts/derivatives (also referred to as parametric insurance) have not seen wide adoption in agriculture outside of applications in developing countries, frequently supported by governments and non-governmental organizations (NGOs). A significant impediment is the lack of financial firms willing to stand ready to sell weather derivatives to individual agricultural producers in the over-the-counter market who, due to the localized nature of weather, face idiosyncratic weather-related risks. In particular, the administrative and reinsurance costs of supplying relatively small contracts with specific terms to many different producers are often prohibitive. The current study considers the potential use of weather derivatives in hedging the aggregate yield/revenues of viticulture producers represented by an industry association located in the province of Ontario, Canada. We examine the sensitivity of aggregate industry yields to several relevant weather-related risks employing copula function analysis. We then consider the potential of a weather derivative in hedging the financial risk associated with cold winter temperatures, which pose the greatest risk to aggregate vinifera yields. The issue of attributing costs and payouts to individual association members remains unresolved, and several alternatives are suggested.

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Energy, variability and weather finance engineering

Cited by 8 publications

References 11 publications

Chemical Leasing (Ch.L.) and the Sherwood Plot

Chemical Leasing (Ch.L.) and the Sherwood Plot

Application of Air Derivative Financial Instruments in Lithuanian Economy

Potential use of weather derivatives in hedging aggregate viticulture yields: An analysis of the Niagara region of Canada

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