I wonder why there is no financial instrument which cleanly isolates climate risk. Seems like there would be a thriving market in that.
So that part of the story I think I understand. Is there a barrier (or lack of demand?) to there being some sort of indexed product?
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but to end this rant and condense what I understand; global climate change risk is hard to model, so can't be cleanly parametrized
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the index is some parameter, is the parameter is random and noisy you can work around it (see ETFs for holding the Russell 3000)
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page 26 of the pdf http://uberty.org/wp-content/uploads/2015/02/MacKenzie-An-Engine-Not-a-Camera.pdf … on "standards" might make the point more cognently
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demand for very specialized risks: soy in the US midwest, floods in Rio, etc. there is no way to aggregate up into standard unit
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"parametric reinsurance" ends up ensuring a lot of climate change risk, through model risk
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the definition of say, a bushel of AAA wheat, is what allows the wheat market to exist
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http://sci-hub.cc/http://onlinelibrary.wiley.com/doi/10.1111/jofi.12061/full … has some work on the introduction of weather derivatives
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