Abstract
As we know, the weather bureau provides the forecasting weather state to people, and people use it to make decision. But the forecasting might be wrong, there might be unexpected weatehr state. The unexpected weatherstate usually make a lot of loss and hurt the economy and society. Therefore, we want to research how the unexpected weather shock affect the society and economy. In addition, there are many literatures about weather derivatives. They use different methods to price weather derivatives or to forecast and fit the weather measure behavior. But there is no literature to analyze how the weather shock affect the weather derivative market. Here we use a easy dynamic stochastic general equilibrium (DSGE) model to analyzehow the weather shock affect the whole economy and weather derivative market. The result shows, when the weather condition becomes better, the output, consumption, and investment will grow up, and the firm will use more capital and labors to produce product, but the saving of consumerwill decline. Moreover, the weather future demand will up, but its price will down when the weather condition becomes better. However, after one period, weather future price will be greater than steady-state level, but it decayes soon and back to the steady-state level.