> For the complete documentation index, see [llms.txt](https://climashield.gitbook.io/climashield/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://climashield.gitbook.io/climashield/formula-for-payout-structure-hdd-based.md).

# 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<br>

**Reference articles link:**

* Pricing Weather Derivatives :-[ https://www.hindawi.com/journals/amete/2015/837293/](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](https://assets.researchsquare.com/files/rs-1891762/v1_covered.pdf?c=1659107422)

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