A unit of temperature in a weather derivative measuring how low the average daily temperature is relative to a reference temperature, usually 18°C or 65°F. A baseline of 18°C minus an average temperature of 13°C gives 5 HDDs signifying how much heating is required that day by a weather-affected trader, e.g. pavement café. The payout is a specified notional amount, i.e. the tick, multiplied by the difference between the HDD level specified in the contract (the strike) and the cumulative HDDs for the period. HDDs are used as a hedge against ‘cooler’ summers by leisure companies, beverage suppliers, etc. Compare with cooling degree days. See COOLING SEASON; HEATING SEASON.