Financial Sector Stress and Risk Sharing: Evidence from the Weather Derivatives Market

• 成果类型: Article
• 署名作者: Weagley, Daniel
• 署名单位: University System of Georgia; Georgia Institute of Technology
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy098
• 发表日期: 2019
• 页码: 2456
• 关键词: liquidity; futures; equilibrium; insurance; frictions; crunch; MODEL

摘要

I examine the effect of financial sector stress on risk sharing in a novel setting: the CME's weather derivatives market. The structure of the market allows me to disentangle price movements due to financial sector stress from price movements due to fundamentals. Contracts, which are typically priced near their actuarially fair value, experience significant price declines during periods of financial sector stress. Contracts with greater margin requirements and total risk are the most affected. The results provide causal evidence of the effect of financial sector stress on the pricing of exchange-traded financial contracts and risk sharing in the economy.