CME group acquires Carvill Hurricane Index, changes name to CME Hurricane Index

by Artemis on April 6, 2009

The CME Group has announced that they have acquired the Carvill Hurricane Index and changed it’s name to the CME Hurricane Index. This makes total sense as the hurricane futures and options contracts are all traded and settled on the CME. In addition the CME have brought EQECAT on board to be the new calculation agent for the index.

These hurricane futures and options are proving extremely popular with over 4,000 contracts traded this year so far and hurricane season still two months away, it’s looking like another bumper year.

The CME’s hurricane futures and options contracts 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.

We at Artemis would like to see the index itself published so that the market can gain more exposure and become more liquid.

You can read the full press release here.

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Doug April 7, 2009 at 12:42 pm

The formula is public.

CHI = (V/V0)^3+3/2(R/R0)(V/V0)^2, where

V = Wind Speed
V0 = Reference Speed (e.g. 74 mph)
R = Wind Radius
R0 = Reference Radius (e.g. 60 miles)

The link to the whitepaper (with CHI values of historical hurricanes) is here:

http://www.cmegroup.com/trading/weather/files/WEA_chi_whitepaper.pdf

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