434: Weather Roulette

Weather Roulette is a suite of verification procedures aimed at providing an indication of the potential value of probabilistic forecasts. The underlying assumption is that a user of the forecasts invests an initial sum of money on the first forecast, apportioning the investment across the three possible outcomes according to the forecast probabilities. The investment pays out fair odds against climatology. For example, if the three categories are climatologically equiprobable the investment will return 3 times (1 / 33%) the investment on the verifying outcome. If there are many locations, results are averaged across them all. The change in the investors fortunes can be viewed in one of two ways:

In the cumulative profits and effective interest rate diagrams, profits or losses made in the first forecast are carried forwards to the second forecast, and so on to all subsequent forecasts.

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