Cooling Degree Day

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Cooling Degree Day

A day on which the temperature in a certain area is above 65 degrees Fahrenheit, necessitating the use of air conditioners. Cooling degree days are used in some weather futures, which are contracts in which the buyer is required to pay the seller some multiple of $20 for each cooling degree day in a month, depending on how much warmer it is. Weather futures allow businesses to hedge against potential losses resulting from unexpected changes in weather. Energy companies are the most common sellers of weather futures. They have become relatively popular investments. See also: Heating degree day.