Research of utilizing the weather derivatives, relation between the major companies and the risk of unseasonable weather in Iwate Prefecture

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The purpose of this research is analysis of the weather risk of a company in Iwate Prefecture, and analyzing the hedge effect when utilizing weather derivatives.I used burning cost method and probability distribution method to calculating the premium of the temperature derivatives. Burning cost method is the method of calculating the premium using the past data. And probability distribution method is the method of assuming about the distribution of the data, performing the simulation based on the distribution, and calculating the premium based on the result of the simulation. I also consider weather derivative transaction between two companies in order to transfer the risks of adverse weather, called risk swap transaction. I used Hellinger distance to verify the equity of the risk swap transaction.I found that the premium of the derivatives calculated by the two methods was different and the equity of the risk swap transaction is not obtained.