. The spatial derivative price distribution involves a risk premium. We examine functional principal components of … example of Leipzig. -- risk premium ; weather derivatives ; Ornstein-Uhlenbeck process ; functional principal components …Due to dependency of energy demand on temperature, weather derivatives enable the effective hedging of temperature …

Many industries are exposed to weather risk which they can transfer on financial markets via weather derivatives … multi-period equilibrium pricing model agents rebalance their portfolio of weather bonds and a risk free asset in each … weather risk and a financial investor diversifying her financial portfolio, we obtain equilibrium prices for weather …