Business and Personal Finance Dictionary

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• CATASTROPHE OPTIONS
  
  The CBOT's option contracts on several regional indexes of losses. The option on the Eastern Catastrophic contract boomed as Hurricane Fran smashed the Carolinas in the fall of 1996. (Source: Robert Clow, "Coping with catastrophe," Institutional Investor, December 1996, pp. 138.) Catastrophe options come in two main varieties: (1) Property Claims Services (PCS) options pay out (European style) based on an index of all claims against property insurance companies. (2)Single-Cat options pay out (American or one-touch style) based on a single, large atmospheric or seismic disaster in a single region (northeast, southeast, east, midwest, or west) or in California, Texas, or Florida. ("A New Take on Cat Options," Derivatives Strategy, February 1998, pp. 5-6.)
  
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