Theoretical framework to introduce rainfall index-based futures contracts in India

Abstract

The proposed study is attempted to frame a theoretical framework for Rainfall Index Based Futures (RIBF) contracts. The study explains the evolution and present status of rainfall risk market in India. The paper contains the detailed theoretical framework for RIBF contracts. Along with this paper elucidate the contract specification to trade the RIBF contracts. The paper show the flow of hedging the rainfall risk of various stakeholders like farmers, insurance and reinsurance companies, banking and financial institution, construction, manufacturing and other who directly or indirectly affected by the rainfall. Eventually the study identify the why the RIBF contracts are not yet developed so for and what are the essential police, regulation required for the design and development of full-fledged rainfall index-based futures contracts in India.

Keywords

• weather derivatives
• ribf
• rainfall risk markets
• hedging
• contract specification and cme