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IBM Paterners to Create Water Derivative

Wednesday January 30 2013

IBM partners with Waterfund to create a new global water index. This wil reflect the actual cost of producing water. Now wter is priced under its cost.

We are studying derivatives in class. Here is another creative used of a derivative. No doubt this will lead to a water futures contract as well as a water ETF. And if IBM is involved you know this is a serious matter.

This is the perfect examplle of why we are studying derivatives, expect more creative uses of these instruments in the future.

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One response to “IBM Paterners to Create Water Derivative”

  1. C Kingsley Avatar
    C Kingsley

    Ok here are the problems, it is a utility and that means that nearly 100% of the stakeholders (99.99 %) are the public. If a water company were to start to change the rate on a customers water on a day to day (or even month to month) basis there will be blood in that water and it will be speculators, investors, and firms that offer this product. While water is a considered a finite resource in terms of usable amounts it is in fact an infinite resource with just the slightest care. Some places have fixed rates for different usages, just as some places have different rates for energy consumption depending on day or amount.
    My point is simple there is no way that SAWS can or will try to tell ten thousand public assistance people “oh well on thursday at 2 pm your rate was $2.00 a gallon till 4 pm” after the fact. It is possible and even likely that just as the energy sector changes your rate depending on the season an ever constantly shifting rate change won’t happen. However like the energy sector options and the like could be huge as long as the impact on the public is limited to small adjustments over a great deal of time.

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