Weather influences our daily lives and choices and has an enormous impact on cooperate revenues and earnings. Weather derivatives differ from most derivatives in that the underlying weather cannot be traded and their market is relatively illiquid. The weather derivative market is therefore...

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...

Weather derivatives (WD) are different from most financial derivatives because the underlying weather cannot be traded and therefore cannot be replicated by other financial instruments. The market price of risk (MPR) is an important parameter of the associated equivalent martingale measures used...