Weather derivatives

From Glossary of Meteorology
Revision as of 17:15, 25 April 2012 by imported>Perlwikibot
(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)

weather derivatives

Business contracts, established betwen two firms to provide financial coverage for specific weather risks, that serve as a form of hedging against potential losses.

The weather risk is the uncertainity in cash flow and earnings due to weather variability. Risks typically covered for a firm in the energy industry are the number of heating or cooling degree- days, and for agribusinesses, the amount of growing season rainfall or the number of July days with temperatures above 32°C (90°F).

Copyright 2022 American Meteorological Society (AMS). For permission to reuse any portion of this work, please contact Any use of material in this work that is determined to be “fair use” under Section 107 of the U.S. Copyright Act (17 U.S. Code § 107) or that satisfies the conditions specified in Section 108 of the U.S.Copyright Act (17 USC § 108) does not require AMS’s permission. Republication, systematic reproduction, posting in electronic form, such as on a website or in a searchable database, or other uses of this material, except as exempted by the above statement, require written permission or a license from AMS. Additional details are provided in the AMS Copyright Policy statement.