Weather Derivative

Filed Under » , , , ,
Dictionary Says

Definition of 'Weather Derivative'

An instrument used by companies to hedge against the risk of weather-related losses. The investor who sells a weather derivative agrees to bear this risk for a premium. If nothing happens, the investor makes a profit. However, if the weather turns bad, then the company who buys the derivative claims the agreed amount.
Investopedia Says

Investopedia explains 'Weather Derivative'

This is not the same as insurance, which is for low-probability events like hurricanes and tornados. In contrast, derivatives cover high-probability events like a dryer-than-expected summer.

Articles Of Interest

  1.

    Introduction To Weather Derivatives

    Learn about a financial instrument that makes temperature a tradable commodity.

  2. Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.

  3. How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.

  4. Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?

  5. Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.

  6. Break Into Forex In 12 Steps

    Learn how to get started in forex trading.

  7. Understanding And Playing The Dow Jones Industrial Average

    Learn strategies for investing in this price-weighted index and how to interpret its movements.

  8. Writing A Covered Call

    Writing an option is the process of selling to another investor the right, but not the obligation, to buy or sell a stock at a given price in the near future. It can also be referred to as shorting ...

  9. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.

  10. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=9d2d0c560f6fc8bd55c1b41c6db4da2e