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UBS launches Global Warming Index

UBS Investment Bank has launched the UBS Global Warming Index (UBS-GWI). The UBS-GWI is a tradable benchmark for global investments in the weather derivatives market. It is constructed using liquid, actively traded Heating Degree Day (HDD) and Cooling Degree Day (CDD) weather futures contracts. These futures contracts settle on the difference between the Average Daily Temperature and a given Base Temperature.

Initially, the index will be composed of weather futures contracts of 15 US cities traded on the Chicago Mercantile Exchange (CME). There is no limit to the number of cities which can be included in the index. To be eligible for inclusion, the volume of futures traded for any given city must represent 1% or more of the total weather derivatives contracts traded on the CME. UBS says that cities

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