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.

Process involving the application of heat such as drying, baking and cooking. The term is significant in fire insurance as damage to any property undergoing a heating process is an excluded form of loss. It is not an excluded risk, as any fire damage that flows from the damage to the heated property will be covered by the policy.

Weather risk term meaning November to March. Weather derivatives may run for just one season or a full year. See COOLING SEASON.

Upward movement of land that can result from the expansion of the clay sub-soil after the removal of trees or other vegetation or from the natural movement of earth and rock. Heave is usually insured when subsidence is also covered.
***
Horizontal displacement upwards, as distance from subsidence.

A conservative strategy used to limit financial loss by effecting a transaction that offsets the underlying position. A hedge correlates with the risk so a profit made on a futures or option contract mitigates the loss on an investment or activity. See WEATHER DERIVATIVES.