A propertycasualty (PC) insurance company purchased catastrophe futures contracts to hedge against losses during the hurricane season.

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A property–casualty (PC) insurance company purchased catastrophe futures contracts to hedge against losses during the hurricane season. At the time of purchase, the market expected a loss ratio of 0.75. After processing claims from a severe hurricane, the PC company actually incurred a loss ratio of 1.35.

What amount of profit did the PC company make on each $25,000 futures contract?

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Financial Institutions Management A Risk Management Approach

ISBN: 9781266138225

11th International Edition

Authors: Anthony Saunders, Marcia Millon Cornett, Otgo Erhemjamts

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