Weather derivatives as an instrument of weather risk management

Abstract

Weather risk has an increasing impact on the functioning of today’s enterprises. To manage weather risk effectively companies may use weather derivatives. This article attempts to classify entities that could be used as part of weather risk management derivatives, especially weather derivatives. At the outset it presents the essence of weather risk, defining and classifying
this phenomenon. This is followed by a description of those entities on which the weather has a significant effect. Next weather derivatives are presented, starting with the construction of the instrument, through the history of weather derivatives on the world market, and ending with a reflection on the applicability of weather derivatives in a Polish context.