According to the Washington, DC-based Weather Risk Management Association (WRMA), of the $4.3 billion transacted in weather derivatives worldwide last year, only about 3% involved the agricultural sector. That is partly because agricultural deals have more variables in the contracts, basis risk is higher and agricultural deals are closely related to precipitation indexes, which are short on pricing data and liquidity. In contrast, $3.7 billion of weather transactions last year were based on
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