Formula for Payout Structure (HDD Based)
Last updated
Last updated
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 :-
Research Article on Blockchain based platform for Trading Weather Derivatives by Research Square :-