Enron Corporation's Weather Derivatives (B) (V 1.2)
5 Pages Posted: 21 Oct 2008
This case describes new options on weather derivatives from Enron, in particular, floors, swaps, and caps on heating-degree days. An electric utility is considering whether to purchase a weather derivative to offset the risk of low volume of kilowatt-hours. After understanding the nature and purpose of the contract, students will structure the option in preparation for valuing it. See also the A case (UVA-F-1299).
Keywords: hedging, option pricing, risk analysis, risk management, simulation
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