Graduation Year
Spring 2012
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Joshua Rosett
Reader 2
Eric Hughson
Terms of Use & License Information
Rights Information
© 2012 Andrew W. Yandell
Abstract
In Champagne, France grape growers and and winemakers work together to make the world's most iconic sparkling wine. Part of what makes Champagne so celebrated is its reputation for constant quality: only the best grapes are used to make wine. In poor vintage years, grape growers sell less grapes to winemakers; poor vintages are the result of bad weather. This presents the opportunity for grape growers to hedge the risk of poor weather and resulting lower harvest values with weather derivatives. This study explores the potential for grape growers to trade them to effectively hedge against low harvest values by hedging against cooler weather in the month of June, when grape vines are flowering and sensitive to cold, through an empirical study of historical grape harvest and temperature data from 1952 through 2011. Weather derivatives would have provided an effective hedge against low harvest values up through 1991. After 1991, harvest sizes and therefore harvest revenues are no longer significantly correlated with weather and weather derivatives no longer provide an effective hedge against low harvest values for grape growers in Champagne.
Recommended Citation
Yandell, Andrew W., "The Potential Application of Weather Derivatives to Hedge Harvest Value Risk in the Champagne Region of France" (2012). CMC Senior Theses. 359.
https://scholarship.claremont.edu/cmc_theses/359
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Agricultural and Resource Economics Commons, Agriculture Commons, Economic History Commons, Finance Commons, Finance and Financial Management Commons
