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Newark, Calif. – October 21, 2002 –
Risk Management Solutions (RMS), the world’s leading provider of
products and services for the management of natural hazard risks,
today initiated the daily publication of weather market price data
and announced the release of mark-to-market functionality in version
3.2 of its Climetrix® weather derivatives trading and risk
management system. Together, these developments will facilitate the
adoption of mark-to-market risk management practices in the growing
weather risk market.
Mark-to-market concepts emphasize valuation based on actual market
price information and are the standard basis for portfolio risk
management in almost all actively traded derivatives markets. Until
recently, many participants in the weather market have relied
primarily on models derived from historical weather data instead of
market data due to insufficient trading liquidity. However, with
annual weather trading volumes now in excess of $4 billion,
liquidity at key trading locations has reached the point that it is
now viable to incorporate mark-to-market techniques into weather
portfolio management.
RMS’ new pricing data service provides clients with daily updates to
market consensus forward curves for 12 key locations in the U.S. and
five in Europe. RMS develops the data from a quality-controlled
daily survey of leading weather traders who represent a majority of
market activity. Among the companies participating in the survey are
Accord Energy, Constellation Energy, EKT (Europe), Hess Energy
Trading, and Innogy. Seasonal price indexes based on the underlying
data for the three most frequently traded locations – Chicago, New
York, and London – will be available on www.climetrix.com, RMS’
weather risk web site.
“As a convergence market, organizations from different sectors have
sometimes approached weather portfolio management from very
different perspectives,” said Jeff Porter, head of weather
derivatives trading at Hess Energy Trading. “The availability of
standardized, independent valuation data will encourage movement
towards more consistent use of mark-to-market concepts which will
facilitate further growth of the market.”
Climetrix v3.2 adds mark-to-market capabilities to the system’s
existing portfolio modeling infrastructure. Traders and risk
managers can use Climetrix to integrate market pricing data with
modeled weather data to develop a complete view of portfolio risk.
The new version of Climetrix also enables quick stress testing of
the impact of different model or market assumptions on key metrics
such as portfolio valuation, VaR, and counterparty exposure.
“While there is widespread acceptance of mark-to-market concepts,
companies have differing views on the appropriate weight to put on
market data at different locations,” commented Paul VanderMarck,
managing director of RMS’ weather risk business. “Climetrix now
allows users to configure a customized approach for incorporating
market data into their portfolio management process. This
flexibility, along with the newly available market data, makes it
possible for weather traders to easily adopt mark-to-market
practices.”
About RMS
Risk Management Solutions is the world’s
leading provider of products and services for catastrophe, weather,
and enterprise risk management. More than 400 leading insurers,
reinsurers, trading companies, and other financial institutions rely
on RMS models to quantify, manage, and transfer risk. Founded at
Stanford University in 1988, RMS serves clients today from offices
in the U.S., Europe, and Japan. For more information, visit our
website at
www.rms.com.
http://www.climetrix.com/ProductServices/PriceIndexes/
Climetrix, RMS,
and the RMS logo are trademarks of Risk Management Solutions, Inc.
All other trademarks are property of their respective owners.
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