Keep basis risk as small as possible!

It is essential that companies wanting to hedge their quantitative risks use the right weather index in order to keep basis risk as small as possible.

A weather derivative based on an inappropriate index can adversely affect the companies earnings and lead to an unwanted outcome.

A great number of OTC-issuers of weather derivatives give the possibility of choosing custom tailored weather options that combine an acceptable basis risk with reasonable premium amounts.

Read the whole article series as published in 'Finanz und Wirtschaft' (in german) [1] [2] [3]

With weather derivatives you are on the right side of weather

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