CME Hurricane Index

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The CME Group acquired the Carvill Hurricane Index on April 6th, 2009 and renamed it the CME Hurricane Index. EQECAT was chosen as the calculation agent for the index. [1]

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 EQECAT's 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.[2]

Contracts expire at the end of each hurricane season. In July 2009 open interest was at $40 million in notional value outstanding so far. Primary buyers so far are reinsurers or oil companies seeking to protect rigs in the Gulf of Mexico, but other hurricane-prone areas are becoming interested. Hedge funds are the main sellers of insurance protection.[3]

References

  1. CME Group Acquires & Renames Hurricane Index; Selects New Calculation Agent. CME.
  2. CME Group Acquires & Renames Hurricane Index; Selects New Calculation Agent. CME Group.
  3. Insuring Against Hurricanes. Forbes.