A Recent Development in Futures and Options Markets Are Weather

question 32

Essay

A recent development in futures and options markets are weather derivatives. One example is a weather futures contract based on a heating or cooling index. The settlement process is similar to an index future where cash is paid based upon the difference between the purchase level and the level of the index at expiration. Is this really gambling?

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Definitions:

Third-Party Claim

A claim made by a defendant against someone who is not already a party to the lawsuit, asserting that this "third party" is actually liable for the plaintiff's damages.

Privity of Contract

A principle indicating that only the parties involved in a contract have the rights and obligations arising from it.

Buyer's Obligation

A purchaser's duty to pay the agreed price for goods or services and to comply with the terms of the contract of purchase.

Credit Sale

A transaction where goods or services are provided in exchange for a promise to pay at a later date.