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Finance Dictionary and Glossary of Investment Terms
weather derivative
Definition 1.
The price paid by investors per share at issue minus the par value per share, times the number of shares issued. Paid-in surplus is recorded in the balance sheet under the shareholders' equity section. also called additional paid-in capital.
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Definition 2.
An instrument used by companies to hedge against the risk of weather-related losses. The investor who sells a weather derivative accepts the risk by charging the buyer a premium. If nothing happens, then the investor makes a profit. However, if the weather turns bad, then the company claims the money.
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