from Columbia University indicates that financial markets are pricing in climate risk into decision-making, which is having a major impact on investing.
When it comes to predicting climate change, traders in financial markets have been making profitable bets.from Columbia University calculated almost 20 years of trading in weather futures contracts on the Chicago Mercantile Exchange , where investors effectively bet on the number of hotter- or colder-than-average days across eight US cities.
The contracts, at about $20 each degree day, are used to offset risk within markets or by speculators. For example, a citrus company may purchase a contract to mitigate the risk of a winter freeze, the study said.For context, if a trader buys one July"cooling degree day" contract for 300 CDDs, the cost would be $6,000.
The impact of the findings have implications for finance more broadly. For the corporate sector, the stakes are high:
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