LMN Insurance Company Is Concerned About Its Exposure to Hurricane

question 25

Multiple Choice

LMN Insurance Company is concerned about its exposure to hurricane losses for property risks it insured on the Gulf Coast.LMN borrowed money from investors by issuing financial securities.LMN promised to repay the money it borrowed with interest if hurricane losses do not exceed a specified level.If hurricane losses exceed the specified level,LMN will repay less than it borrowed and use the extra money to fund hurricane losses.The securities that LMN issued are

• A)call options.
• B)futures contracts.
• C)weather options.
• D)catastrophe bonds.

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Definitions:

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