Skillful seasonal predictions of boreal winter accumulated heating degree-days and relevance for the weather derivative market

Abstract

It is demonstrated that boreal winter accumulated heating degree-days, a weather derivative product that is frequently demanded by energy suppliers (among others), can be skillfully predicted with a lead time of 1 month, that is, at the beginning of the previous November, for many regions of the Northern Hemisphere extratropics. This finding contradicts the assumption of poor seasonal predictability for this variable. This short paper is meant to properly inform the participants of the weather derivative market to assure market transparency and to foster a scientific discussion on how to disseminate this formerly unknown expert knowledge. © 2013 American Meteorological Society.