Effect of Applying Risk Financing to Snow and Ice Control Project

Abstract

For local governments in cold, snowy regions, snow removal is an important public service. The cost of snow removal fluctuates greatly each year, since it is influenced by snowfall. This study proposes to apply risk financing for snow and ice control project, especially snow removal service of Sapporo in order to hedge the risk of snow removal cost fluctuation. We show how insurance and derivative can level the snow removal cost fluctuation.