Purpose – Conventional wisdom states that catastrophe risk securities show no or little correlation with stock and bond markets, and offer significant attractions to investors providing a good diversification of risks. This study examines the correlation between catastrophe risk securities and...

Purpose – The purpose of this paper is to examine empirically the basis risk and hedging efficiency of temperature‐indexed standardized weather derivatives in hedging weather risks in the US energy industry. Design/methodology/approach – Within the risk minimization framework, using power...

Purpose – The paper aims to examine theoretically valuation of weather derivatives and their hedging roles in corporate risk management. Design/methodology/approach – The paper introduces an extended financial market model in which the weather risk is included as an independent random...