The traditional necessary condition for futures market inefficiency is the existence of alternative forecasting methods that produce mean squared forecast errors smaller than the futures market. Here, a more exacting requirement for futures market efficiency is proposed - forecast encompassing....

Weather derivatives represent an important financial innovation for risk management. As with the use of any derivatives contract, the behaviour of the basis ultimately determines the net-hedged outcome. However, when using weather derivatives to hedge volumetric risks, risk managers often face...