Tradition Re's Dutch auction hedges 2010 hurricane risk

Offers were submitted in the form of point price levels, as traded on the Chicago Mercantile Exchange (CME), for a Florida CME Hurricane Index (CHI) Seasonal Accumulated Binary Option with a strike level of 22 – this denotes the level of hurricane damage, as measured against the CHI.

The Dutch auction format meant offers were accepted in a minimum bid size of $1million (100 lots) and increments of $50,000 (50 lots) thereafter. When a level was deemed acceptable, a minimum transaction size of $2 m