Degree-day contract settlement calculator

How a weather derivative pays out.

Interactive: degree-day contract settlementHard

Strike (degree days) Actual accumulated Tick value $ per degree day Payout cap $ (0 = uncapped) Position

Degree days vs. strike: —
Uncapped settlement: —
Actual payout: —
Cap status: —
Breakeven: —
Health warning: —

Defaults are a gas utility short heating degree days — it receives when the winter is warm and it sells less gas. A cap makes the contract cheaper and removes protection against exactly the extreme winter that would hurt most. See weather derivatives.

The idea behind it

This calculator belongs to Commodities, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.

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The same in full — six points, and why each one matters

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