Goldman Sachs will start trading weather derivatives on behalf of customers and on a proprietary basis in the fall, a move that market players say lends investment banking credibility to the growing market in weather risk management. Greg Agran, managing director in New York, told DW the firm decided to set up the department because of a combination of customer demand and improving liquidity. He added that the firm needs to be in the market to offer commodity end users complete risk management products.
Several market professionals expect Goldman to be a significant player. One said, "Goldman does not enter markets in a small way." The operation will focus on the U.S. and there are no plans to extend the desk to Europe or Asia, according to Agran.
Weather derivatives pros in New York said Goldman's entrance, "would be a wake up call for its competitors," forcing them to follow. At the moment insurance and energy companies, with the exception of French banks, such as Société Générale and BNP Paribas, dominate the industry.
