A few days ago, I came across Chris’-s question concerning recession prediction:
My Question: How would you structure a US recession prediction market? (…without splitting liquidity, I mean.)
My initial response to this was:
A recession is defined as two consecutive declines in real GDP. Why not create a series of contracts, as follows:
Here are some more of the contract details:
The Expiry Price will be 100 if Real GDP declines for two consecutive quarters, and 0 if Real GDP does not decline for two consecutive quarters. Final Real GDP figures (3 months after quarter end) will be used, not the advance (one month after) or preliminary (two months after) Real GDP numbers.
The Result used to determine the expiry prices will be the official figures released by Bureau of Economic Analysis, an agency of the US Dept of Commerce.
Comments welcome and appreciated!