Weather Future

A type of weather derivative that obligates the buyer to purchase the value of the underlying weather index - measured in heating degree days (HDD) or cooling degree days (CDD) - at a future date. The settlement price of the underlying weather index is equal to the value of the relevant month's HDD/CDD multiplied by $20. Weather futures enable businesses to protect themselves against losses caused by unexpected shifts in weather conditions.

The popularity of weather futures is growing rapidly and becoming a more common method for energy companies to hedge against a change in demand due to changes in temperature. For example, if the month of October is warmer than expected, customers will not use as much heat. This will cause a loss for the energy company. If, however, the energy company has sold a weather future for the month of October, the energy company will receive (because it's obliged to sell) the value of October's HDD, providing compensation for its losses.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Weather forecasting — weather forecaster redirects here. For other uses, see Weatherman (disambiguation). Forecast of surface pressures five days into the future for the north Pacific, North America, and north Atlantic ocean. Weather forecasting is the application of… …   Wikipedia

  • Weather radar — in Norman, Oklahoma with rainshaft …   Wikipedia

  • Weather control — is the act of manipulating or altering certain aspects of the environment to produce desirable changes in weather.History of weather controlSome American Indians had rituals which they believed could induce rain. The Finnish people, on the other… …   Wikipedia

  • Weather and Society Integrated Studies — Weather and Society * Integrated Studies (WAS*IS) is an international movement that is changing the weather enterprise by integrating social science into meteorological research and practice. WAS*IS was formed to build an interdisciplinary… …   Wikipedia

  • weather forecast — weather ,forecast noun count * a report on likely weather conditions for a period of time in the future …   Usage of the words and phrases in modern English

  • weather forecaster — weather ,forecaster noun count someone whose job is to study the weather and say what it will be like in the future …   Usage of the words and phrases in modern English

  • Weather — Cold weather redirects here. For the 2010 film, see Cold Weather (film). Weather systems redirects here. For the Andrew Bird album, see Weather Systems. For the geological process, see Weathering and Erosion. This article is about the atmospheric …   Wikipedia

  • weather forecasting — Prediction of the weather through application of the principles of physics and meteorology. Weather forecasting predicts atmospheric phenomena and changes on the Earth s surface caused by atmospheric conditions (snow and ice cover, storm tides,… …   Universalium

  • weather — weath|er1 W2S1 [ˈweðə US ər] n [: Old English; Origin: weder] 1.) [singular, U] the temperature and other conditions such as sun, rain, and wind ▪ What s the weather like today? ▪ a period of unusually hot weather ▪ The weather turned bitterly… …   Dictionary of contemporary English

  • weather — 1 noun 1 (singular, uncountable) the temperature and other conditions such as sun, rain, and wind: the weather: What was the weather like on your vacation? | hot/wet/cold etc weather: a spell of very dry weather | weather forecast (=a report… …   Longman dictionary of contemporary English

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.