looking to execute what is believed to be the first weather
derivative in Thailand in the coming weeks. In the precipitation
option the Thai agricultural conglomerate is hedged against
rainfall below a certain level in May and June, according to an
official at SG, who declined to give the exact details of the
trade. The option provides USD1-2 million of protection for a
premium of approximately 10%.
Weather derivatives structurers at rival firms in
Tokyo were not aware of any other transactions. One added, "we've
also considered this market but you can't be sure of the quality of
data in Thailand," he added. In the U.S. and Europe most weather
derivatives are referenced to temperature not precipitation, but
structurers said precipitation is a greater concern in Thailand
because of large fluctuations in rainfall.