Weather Derivative Payoffs Can Be Based on Each of the Following

question 48

Multiple Choice

Weather derivative payoffs can be based on each of the following variables except

• A)temperature above a given level
• B)inches of snowfall
• C)total value of insurance claims
• D)temperature below a given level
• E)sunshine

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Definitions:

Carrying Value

The book value of assets and liabilities reported on the balance sheet, considering factors like depreciation or amortization.

Amortized Cost

Amortized cost is the initial investment amount of a financial asset or liability adjusted for principal repayments, plus or minus the cumulative amortization of any difference between the initial amount and the maturity amount, and reduced by any potential impairment or uncollectibility.

Unrealized Holding

Unrealized holding refers to the increase or decrease in the value of an investment that has not yet been sold by the holder and thus, any potential gain or loss is not yet recognized in the financial statements.

Fair Value

An estimate of the market value of an asset or liability, based on current prices in an open and competitive market.