Is there a minimum settlement value for each HuRLO™ if that outcome occurs?
Yes, a percentage of par set by WRS prior to trading begins in each series. For illustrative purposes, assume par is $1,000, so prices are $1,000 times market probabilities (plus a small time-value-of-money adjustment), and WRS sets the minimum settlement value at 50% of par or $500. The pricing algorithm has been constructed to adapt if an options series becomes severely imbalanced with so many buyers of one HuRLO outcome that the holder of such an option would receive less than $500 if that HuRLO turns out to be the location of first landfall (or No Landfall). If that should occur, the algorithm will increase the price for that option outcome to ensure that the settlement value for that option will not fall below $500. This will limit the risk of market participants that are using HuRLOs to hedge actual storm damages by locking in at least this minimum amount of protection. So long as an option does not cost more than $500, the option holder will receive a settlement amount at least
