This topic contains a solution. Click here to go to the answer

Author Question: The CME Tornado Index Futures contract is cash settled. The dollar value of one CME Tornado Index ... (Read 236 times)

future617RT

  • Hero Member
  • *****
  • Posts: 543
The CME Tornado Index Futures contract is cash settled. The dollar value of one CME Tornado Index Futures contract is the product of the CTI index and the futures contract multiple of $1,000.

The CTI Tornado force measure takes two input variables: the average wind speed of a Tornado (in miles per hour) and the radius of the base of the Tornado force winds (in miles).

For the Tornado Index Futures contract, the CTI index is the sum of the CTI values for all Tornados which make landfall between Texas and Nebraska. If twenty tornados hit with an average CTI value of 4, then the CTI index is 20 * 4 = 80 and the CME Tornado Index Futures contract value is 80 * $1,000 = $80,000.

The contract is cash settled, so at the settlement date, cash is exchanged between losing and winning counterparties to settle the contract.

You are planning to travel to the New Orleans in the coming months. However, the trip is right in the middle of tornado season. You are worried that a tornado will ruin your vacation. To hedge the risk, what position should you take in the CME Tornado Index futures contract?
◦ Short
◦ Long


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by future617RT on Apr 25, 2021

chloejackso

  • Sr. Member
  • ****
  • Posts: 316
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 29% of students answer this correctly




future617RT

  • Member
  • Posts: 543
Reply 2 on: Apr 25, 2021
Excellent


adf223

  • Member
  • Posts: 304
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

Did you know?

Serum cholesterol testing in adults is recommended every 1 to 5 years. People with diabetes and a family history of high cholesterol should be tested even more frequently.

Did you know?

Signs of depression include feeling sad most of the time for 2 weeks or longer; loss of interest in things normally enjoyed; lack of energy; sleep and appetite disturbances; weight changes; feelings of hopelessness, helplessness, or worthlessness; an inability to make decisions; and thoughts of death and suicide.

Did you know?

The first-known contraceptive was crocodile dung, used in Egypt in 2000 BC. Condoms were also reportedly used, made of animal bladders or intestines.

Did you know?

Pope Sylvester II tried to introduce Arabic numbers into Europe between the years 999 and 1003, but their use did not catch on for a few more centuries, and Roman numerals continued to be the primary number system.

Did you know?

The FDA recognizes 118 routes of administration.

For a complete list of videos, visit our video library