Abstract
abAbstract. Many companies depend on weather conditions, so they requirereliable weather forecasts for production planning or risk hedging. In thisarticle, we propose a new way of gaining weather forecasts by exploiting theforward-looking information included in the market prices of weather deriva-tives traded at the Chicago Mercantile Exchange (CME). orF this purpose,the CME futures prices of two monthly temperature indices relevant for theenergy sector are compared with index forecasts derived from meteorologicaltemperature forecasts. It turns out that the market prices generally outper-form the meteorological forecasts in predicting the outcome of the monthlyindex. Hence, companies whose pro t strongly depends on these indices,such as energy companies, can pro t from this additional information sourceabout future weather.Keywords: Wathere derivatives, weather forasts,ce CME, energy sectorJEL classi cation: G15, G17, Q41, Q47
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