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Newark, Calif. - November 5, 2001 -
Risk Management Solutions (RMS), the world's leading provider of
products and services for the management of natural hazard risks,
today released an advanced daily temperature simulation model that
provides weather traders, risk managers, and corporate end-users
with a sophisticated new capability for valuing weather derivatives.
This new capability is available to RMS clients in Climetrix®
version 3.0, the latest release of the company's weather derivatives
trading and risk management system.
The new daily model offers an alternative to
the index modeling capabilities also available within the Climetrix
system. While index models rely on an aggregate-level analysis of
historical index values, the new RMS daily simulation model analyzes
weather risk by simulating the day-by-day progression of
temperatures over thousands of years of simulated weather. The model
uses extensive records of historical daily temperature data for
individual weather stations as the baseline for this analysis.
Bob Henderson, head of research at Element Re
Capital Products, commented, "We believe that daily modeling
capabilities provide important insights into weather risk beyond
what is possible with the index models that have traditionally been
used in the market. As daily models evolve over time, we expect many
market participants to move towards using such models as the primary
basis for both trading and portfolio risk management."
By simulating a time series of temperature
data, the new daily model provides superior information for valuing
certain types of weather contracts that are difficult to analyze
accurately with an index model. These include contracts based on
shorts periods of time such as one week, or those based on event
indexes that measure the number of times a specific temperature
threshold is reached. The daily model also provides an alternative
perspective for the analysis of contracts based on standard degree
day or average temperature indexes.
"Developing a robust daily model is a very
challenging undertaking due to the numerous complexities of
temperature behavior, such as seasonal patterns in daily temperature
variability and correlations in day-to-day temperature values,"
noted Dr. Anders Brix, senior modeler at RMS. "Our new model
addresses these and other complexities and is the result of an
intensive R&D effort over the past year."
RMS will be hosting seminars in Houston, New
York, and Frankfurt on
November 8, 9, and 13 to introduce the new daily model. The
Frankfurt presentation will take place immediately prior to the
Weather Risk Management Association's annual European meeting. For
more information, contact RMS at climetrix@rms.com.
Climetrix is an Internet-based application that provides integrated
access to all of the data, advanced pricing tools, and portfolio
management capabilities necessary for successful participation in
the weather market. The application can be accessed at
www.climetrix.com. Since the initial release of Climetrix in July
2000, more than 70% of active weather market participants have
licensed the system or the underlying weather data.
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 web site at
www.rms.com.
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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