A weather derivative that is principally used to transfer risk associated with adverse weather events. It is an index-based futures contract in which one counterparty receives payment if the degree days over a specified period are higher than the strike level, while the other counterparty gets paid if the degree days over that period are less than the strike. A business with weather exposure may choose to buy or sell a weather futures in order to hedge against climate changes that inversely affect its operations.
This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Comments