In December 2002, Felix Carabello was listening to the radio during a snowstorm and heard Michael Bloomberg, New York’s mayor, estimate each inch of snow would cost $1m.

“The city had gone through its snowfall budget early in the season so had to dip into other budgets. That generated the idea for me that they could get those dollars back from the market,” said Mr Carabello, director of alternative investment products for the Chicago Mercantile Exchange.