Tuesday, April 07, 2009

CME Introduces Futures and Options on Hurricanes

From the press release:

CME's hurricane futures and options will be settled to the CME Hurricane Index (CHI), which provides a numerical measure of the destructive potential of a hurricane. The CHI is based on a calculation of the maximum wind velocity and size (radius) of each official storm to calculate the potential for physical and financial damage. The higher the CHI number, the more potentially damaging the hurricane.

In addition to its hurricane products, CME Group offers weather contracts based on aggregate temperatures for 45 cities, including 24 throughout the U.S., 10 in Europe, six in Canada, three in Australia and two in Japan. CME Group also lists products used to hedge risk associated with snowfall and frost.

More information here: Hurricane futures and options are financial tools designed to offset hurricane-related risk by offering a means of transferring risk to the capital markets.

1 Comments:

At 4/07/2009 10:51 AM, Blogger ExtremeHobo said...

There are dozens of beach houses in Nags Head, NC that could use something like this. Several were built about a decade ago and grass has since grown around their property from the dunes. If a house is destroyed beyond 51%, and is located near this grass, then it can not be rebuilt due to local laws. So, if you buy a $500,000 beach house and it is destroyed, you are left only with a 1/3rd acre of land that you cant build on.

 

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