Subject category:
Finance, Accounting and Control
Published by:
Darden Business Publishing
Version: 02.2011
Revision date: 2-Jun-2011
Length: 4 pages
Abstract
New options on weather from Enron are described, 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. An Excel spreadsheet file ''UVA-S-F-1300'' is available to accompany this case.
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Abstract
New options on weather from Enron are described, 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. An Excel spreadsheet file ''UVA-S-F-1300'' is available to accompany this case.