Risk Markets And Politics

Monday, May 26, 2008

Foreseeable pathologies in political event markets

Last Month, Marc Groz of Topos Capital graciously invited me to deliver a guest lecture to his class at NYU. The talk, "Measured Enthusiasm for Prediction Markets", was given to about 20 students. It introduced prediction and decision markets, then went off into tax and policy markets. As the title suggests, it wasn't evangelical, but I hope to have excited a few students about this new frontier. The presentation includes a couple of problematic scenarios that I have not seen discussed yet.

Some of these issues such as hedged manipulation could be addressed if the CFTC begins regulating event markets. More on that shortly..

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