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Online Exchanges Hedge Foreclosures To Crude Oil Crisis
By Daya Baran at June 10, 2008 0 Comments
New online exchanges are allowing small businesses to hedge against earthquakes and catastrophes the same way big business has done for years. Companies such as Weatherbill.com and Stormexchange.com buy large contracts and sell them in smaller chucks at prices that are affordable to small business.
Priceline.com recently a deal where the company will refund money to buyers of its vacation packages if it rains more than a half an inch a day during half or more of the holiday. Priceline can afford to do so, by using financial products that hedge against extremes in heat, cold, wind and rain.
The new online exchanges allow companies to hedge against almost any type of risk to their business, such as a change in weather, higher crude oil prices, rising commodity prices or interest rates.
Small hotels in coastal areas can hedge against hurriances like the big chain hotels and minimize the risk exposure to their business. John Cavanagh, CEO, Carvill Reinsurance, said “I think a lot of retail interest will be developed”. Maybe here will be a hedge against $5 gas prices for individuals or maybe someone will create derivative for the Web 2.0 companies to hedge against revenue that might not materialize.
Labels: online services, priceline.com, weatherbill.com
