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.

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