Formula for Payout Structure (HDD Based)
F = α * max(HDDs - K, 0) F = Financial Value associated with a weather derivative contract
α = Co-efficient that scales payout for each unit of HDD
HDDs = Denotes the cumulative Heating Degree Days for a specified time period
K = Threshold level that triggers the payout
Reference articles link:
Pricing Weather Derivatives :- https://www.hindawi.com/journals/amete/2015/837293/
Research Article on Blockchain based platform for Trading Weather Derivatives by Research Square :- https://assets.researchsquare.com/files/rs-1891762/v1_covered.pdf?c=1659107422
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