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CDD Swap


A degree day swap that combines a call and put option with the same strike CDD and on the same underlying location (e.g. city). This swap is mainly used to stabilize revenues over a specific period of time. An investor who long the swap (the buyer) will receive payment if the actual (recorded) CDD is greater than the strike level, and will have to pay out if the actual (recorded) CDD is lower than the strike.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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