An August CDD Weather Option Is Offered on the Cumulative

question 4

Multiple Choice

An August CDD weather option is offered on the cumulative monthly CDD at an Atlanta weather station. An investor has a long call with a strike price of 375 and a short call with a strike price of 400. The payment is $10,000 per degree day. What is the maximum payoff?

• A) $500,000
• B) $250,000
• C) $100,000
• D) $50,000

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Definitions:

Population Boost

An increase in the number of individuals in a population, often due to factors such as higher birth rates, lower death rates, or immigration.

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A vast high plateau of semiarid grassland that extends across much of North America, from the Mississippi River to the Rocky Mountains.

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A significant barrier or hurdle that impedes progress or achievement in a particular endeavor or project.