Climetrix is used to analyze, to manage, and to price complex financial instruments called derivatives. Analysts and underwriters from large energy vendors and insurance companies use it to track contracts related to weather. An example of such a contract would be a ski resort wishing to insure against too warm a winter. Another example might be an electricity company wishing to insure against too cool a summer in California.
The Climetrix system is an analytic tool for evaluating these instruments. It combines a sophisticated user interface together with the most powerful analytic engine in the market. Many clients of Climetrix use this software instead of using their own analytic tools.
Many people notice something special when they see Climetrix. It does not look like any other application found on the web today. It is in fact one of the newest generations of Web applications that utilizes Java. Even though it looks like a normal Windows program, it runs through a web browser and all data and analyses run via the Internet. Clients pay money every year to be able to use Climetrix. Because it exists on the Web, the most current version is always available, but it is never installed on the computer. It has been said that within ten years, the majority of all business software will be like Climetrix.
The only requirements are a machine with a web browser and Java from Sun Microsystems. The Java Plug-in is a technology that connects to a web browser. Acrobat from Adobe is one example plug-in. Flash from Macromedia is another example plug-in.
Analysts begin their pricing strategies by examining historical temperature data for hundreds of stations around the world. These provide them with many years of temperature data that they use to structure contracts.
At the time when a preliminary contract has been created, various probability distribution models can be applied to see how the contract will perform. Fifty or more years of historical weather data are used to generate 10,000 to 250,000 Monte-Carlo simulations.
When an analyst examines all of the results of these simulations, a contract can be structured to represents the proper insurance against the risk of weather problems.
Temperature forecast information is also used by analysts. The data is available from a number of vendors that offer from one to fifteen days of predictions.
Individual contracts as well as contracts in portfolios can have many types of analytical models performed on them. For active contracts, the analysis can be performed to produce results which show current profits or losses.
The analysis data below represent the results of just one analysis. The results are generated in a fraction of the time that is normally required. This is one of the reasons why the Climetrix system is increasingly popular.