IBM to help establish market for trading weather options
What are the odds of a cold day in hell? Storm Exchange is setting up a market that will let corporations analyze business changes due to fluctuations in weather.
Some people make money trading contracts on foreign exchange. Dave Riker wants to make money by hedging bets on the weather.
Riker is the CEO of Storm Exchange, which is setting up a market that will let corporations analyze, and thereby insulate themselves from, changes in their businesses due to fluctuations in the weather. If you can come up with a way to estimate the impact or frequency of storms, banks, insurance companies, food processors and others can take corrective actions. The risk can then be alleviated by letting traders swap derivative contracts on how the economy might be impacted by weather. No word if polar bears or others affected by global warming can participate.
"Nearly one-third of the economy is impacted by weather," Riker said during a presentation at the GoingGreen conference this week. (Riker has delivered the pitch, almost word for word, at other conferences I've seen.)
It goes beyond ski resorts closing early, or on a particular weekend, because of a lack of snow. Retailers could use the data to come up with programs to encourage consumers to buy snow blowers in July rather than August, thereby smoothing out fluctuations in shipping and factory orders.
Storm Exchange recently signed a deal with IBM, Riker added. Under it, the two companies will integrate a short-term weather forecasting system into Storm Exchange's platform. It will give subscribers a forecast that looks 48 hours ahead. Subscribers will be able to get weather predictions for time periods as small as 10 minutes.
Yes, it sounds Enron-y, but it could be cool.