(FORTUNE Magazine) – What if the next time it snowed your pockets filled with cash? What if a broker could buy a sunny day--and sell short a dreaded winter? Well, it's happening. Over the past few years the weather-derivative market--invented seven years ago by Enron to hedge its energy liabilities--has seen exponential growth. In fact, hedging with weather contracts is beginning to neutralize a host of financial risks. There's just one problem: Meteorologists still lack reliable worldwide data. "Believe it or not, there is not much attention paid globally to taking accurate measurements of the weather," says Steve Jewson, a meteorologist who develops derivatives for Risk Management Solutions.

So when officials from 45 nations met in Tokyo last month to discuss a White House--led initiative to improve global environmental and weather data, there was more at stake than good science and sunny vacations. The far-reaching Group on Earth Observations (GEO) program plans to standardize and combine international weather stats from virtually every type of monitoring system--but it may take as long as ten years. In the meantime, the market is charging ahead.

Hedging weather risk is catching on for two reasons. Recent research has demonstrated the correlation between the weather and business (it has a direct impact on 43% of U.S. GDP, according to the National Research Council). And the impact of weather, once dismissed as uncontrollable, is now seen as a force to be mitigated. Derivatives, contracts whose value is derived from the fluctuating value of an underlying security or index, are by definition a calculated risk. But in the context of corporate math, they make perfect sense. A gas company, for example, might enter into a contract predicting a certain amount of warmer-than-average days in winter as a way to hedge the risk of lost profits when customers use less heat. The hit of a worst-case scenario is blunted, and the possibility of large operating profits is traded for modest but stable ones. "We'd been managing all these other risks, but never touched this," says Don Chance, a professor of financial risk management at Virginia Tech. And as data becomes more sophisticated, companies are crafting creative contracts on variables like reservoir water levels or sea-level rise. PricewaterhouseCoopers estimates that more than $4 billion was spent on weather contracts last year.

As the weather derivative market expands, the price of admission is falling. It's now possible to enter into a basic contract through the Chicago Mercantile Exchange (www.cme.com) for less than $2,000. But even Storm Stories fanatics would be better off leaving the hedging to big investors with deep pockets. For individuals, this market can be dangerous and unpredictable--just like the weather. --Abrahm Lustgarten