Patent ID: 8296210

Claim:
A method of determining a volatility for a group of weather derivative products; the method comprising: (a) determining at a processor volatility levels for weather derivative option contracts having a range of strike prices and a range of times to maturity using an option volatility model; (b) identifying at the processor any of the weather derivative option contract volatility levels that deviate from adjoining volatility levels corresponding to weather derivative option contracts by a predetermined threshold; (c) replacing the volatility levels identified in (b) with weather derivative futures contracts volatility levels for corresponding futures contracts when the replaced volatility levels will not exceed adjoining volatility levels by the predetermined threshold; (d) replacing the volatility levels identified in (b) with meteorological volatility levels when the futures contracts levels in (c) will exceed adjoining volatility levels by the predetermined threshold; and (e) displaying an implied volatility surface that includes volatility levels for at least some of the weather derivative option contracts and at least either (i) a volatility level for a weather derivative futures contract from (c) or (ii) a meteorological volatility level.