CME Group, the world's largest and most diverse derivatives exchange, announced today that it has acquired the Carvill Hurricane Index from Carvill America Inc. and renamed it the CME Hurricane Index. In addition, CME Group signed a Memorandum of Understanding with EQECAT, the leading authority on extreme-risk modeling, to be the new calculation agent for the index. The hurricane futures and options contracts are listed with, and subject to, the rules and regulations of CME.
"We continue to be encouraged by the growth of the weather derivatives market, especially hurricane futures and options, which already have traded 4,000 contracts before the start of this year's hurricane season," said Felix Carabello, Director of Alternative Investment Products at CME Group. "As the new calculation agent for the hurricane index, EQECAT will help CME Group continue to provide innovative ways for businesses to manage their risk associated with weather events."
"EQECAT is very excited about supporting the CME as calculation agent for its Hurricane Index," said Dennis Kuzak, Senior Vice President of EQECAT. "And with the integration of EQECAT's risk modeling technology, we hope to increase the attractiveness of the CHI by providing superior risk metrics which would assist market participants in pricing and hedging property insurance risk."
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.
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. For more information on CME Group weather contracts, please go to: http://www.cmegroup.com/weather.