Yearly Archives: 2007

Why does Tradefair care about Prediction Markets

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Are prediction markets good at providing a true measure of probability?

Crowd theory says yes, business interests may complicate things.

How is accuracy obtained?

Well of course the answer is obvious – if you want an accurate measure of probability look at the fundamentals for yourself and then ask a lot of people for their opinion. If you encourage the participants to put either reputation and/or money at risk their prediction skills get better. If you provide a platform where systems can participate as well as individuals then not only is the best assessment of probability obtained but it becomes highly dynamic and shifts with every small change in the underlying markets/world conditions.

Sounds complicated, but what does this mean for a business?

Well, simply build an exchange that can provide unprecedented capacity and let the world decide what the likelihood is of an event happening.

And who are Tradefair?

Tradefair is Betfair&#8217-s new home for the financial bettor and trader – our binaries exchange product has opened with straightforward traditional financial markets (FTSE up/down) but one of the things that excites us hugely is the inclusion of market types such as Interest Rates. We call these the &#8220-unhedgeables&#8221-, markets that we all have an opinion on, all understand some of the fundamentals but don&#8217-t have the safety net of an underlying market to hedge into. We are starting in a modest way but we firmly believe that the ONLY place that true market sentiment can be measured is on an exchange.

Why does Tradefair care about prediction markets?

Take a look at Betfair today – it has some of the most liquid, volatile and high participation prediction markets in the world. Participation drives the price down and provides fantastic value to our customers. This has allowed us to build a business that we are all really proud of. The Tradefair team believe that by focusing on financial markets, delivering exchange technology that allows mass participation in an accessible, highly available and transparent manner will allow us bring that same value proposition to the financial sector.

0-100 prices… explained to the British traders.

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BinarySoft:

Why Binary Prices?

There are several advantages of using binary prices instead of decimal odds:

1. Binary prices are more intuitive than decimal odds.
Ask a person on the street what they think the chances are of a certain event happening: they aren’t likely to say “I think it is around a 1.4 shot” or “I reckon it’s around 2/5 on”- most people would say “I think it has around a 70% chance of happening”. With binary prices, you are trading the percentage chance of the event occurring.

2. Trading is easier with binary prices than decimal odds.
When trading with decimal odds, in order to achieve an equal profit or loss regardless of the outcome of the market, the stake size needs to be continually recalculated as the odds vary. With binary prices, trading in and out of markets is easy – to achieve an equal profit or loss across all outcomes, all you have to do is get your net position on the market to zero. This can be done in BinarySoft BDI by simply setting your stake to the current net position and then placing an order accordingly. By monitoring your net position you can trade in and out of markets faster and more easily than with decimal odds.

3. The stake size does not need to be continually adjusted.
Compare a bet of ?100 at decimal odds of 1.01 vs. a bet of ?100 at decimal 100.0 – a huge difference in the amount of money being risked. With decimal odds you have to continually adjust your stake as the odds vary in order to risk the same amount. The equivalent of these two bets in binary prices is ?1 per point at a price of 99.0 and ?100 per point at a price of 1.0.

4. Binary prices enable both selections of a binary market to be combined into a single concise view of the market.
When viewing a binary (two-selection) market in BinarySoft BDI, all of the bets across both selections are combined into a single ladder-style interface. It also means that you can place a bet on the outcome of the binary market without having to worry about which underlying selection you should choose in order to place your bet. This combination of both selections into one concise view of the market is only possible when using binary prices.

Meet Nigel Eccles, a veteran of UKs betting exchange industry, and an innovator.

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Nigel Eccles

Nigel Eccles (HudBud CEO – Previously with McKinsey, Betdaq, and BetFair-Flutter)

HubDub is developing a web application which will change the way people discover, track and interact with news stories.

His startup: HubDub – (What they are brewing: a news aggregator using some kind of prediction market mechanism.)

More info:

What we are developing is a social news aggregation site. Elements of it are similar to Digg but as a whole it is a totally unique concept (partially based on experience developing betting exchanges). The site will provide a whole new way of interacting with news and the site in turn generates its own news out of user interactions. Initially the site will be US focussed as it is the bigger market. The primary revenue stream would be advertising however there are a number of other very significant revenue opportunities once the site reaches some scale.

And, yes, they do have a blog. :-D

Read the previous blog posts by Chris. F. Masse:

  • Oprah Winfrey
  • RIGHT-CLICK THIS IMAGE, AND FILL IN THIS SURVEY, PLEASE.
  • Papers on Prediction Markets
  • The Journal of Prediction Markets
  • The 45-degree Line
  • Implied Probability of an Outcome –BetFair Edition
  • Justin Wolfers on Rudy Giuliani = not convincing… yet

IG Indexs PureDeal

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The IG Index software is called PureDeal and have the capability to offer clients FSB, Binary Bets, Ladder Trading (same line InTrade), and many other products. The new CFD platform looks nearly identically.

This is from our good friend Fabian John (from Germany). Right-click on the image below, and you&#8217-ll see a Flash presentation of IG Index&#8217-s PureDeal.

IG Index’s PureDeal

Only 7 web publications took the BetFair bait on global warming.

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BetFair climate

Yeah, at Midas Oracle, we do swallow baits on prediction markets!!! :-D

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BETFAIR: HSBC Investable Climate Change Index, ECX CFI Futures Contract, and Highest and Lowest UK Temperature.

MIDAS ORACLE: BetFair’s Global Warming Prediction Markets &#8212- CFM&#8217-s Views + BetFair&#8217-s Global Warming Prediction Markets

50 askmarkets invites for Midas Oracle readers

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Aiming at providing high-quality prediction markets services, both of unique elegance and zero learning curve, we plan to start deploying by going deep. And by deep we don&#8217-t refer to techcrunch, or walmart (yet), but to the biggest active community of prediction markets experts, midas oracle.

So, we start by giving you, the most demanding audience for such a service, early access to first stress-test askmarkets and to email us your impressions, proposals and bugs you encountered (we bet there are still some hiding somewhere), before really going &#8216-wild&#8217-, ..em public. Just navigate to our homepage, enter your email and password &#8216-midasoracle&#8217- and the first 50 of you will get in (we&#8217-ll also invite the latecomers later on).

u r invited to askmarkets!

Do you see a sixth dimension to the prediction markets?

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Midas Oracle is about the event derivative markets and:

  1. their profit opportunities (sought by the traders)-
  2. their predictive power (investigated by the economists)-
  3. their entertainment ability (delivered by the play-money prediction markets)-
  4. their hedging utility (employed by the risk managers and monitored by the CFTC)-
  5. their decision-making capacity (alleged by Robin Hanson).

E-mail me or leave a comment below.

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UPDATE: Xpree&#8217-s Mat Fogarty&#8230-

their training / motivational ability (corporations like their employees to be engaged and knowledgeable about key metrics – PMs reward this process)

Reading the Markets – Forecasting Prediction Markets By News Content Analysis

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Reading the Markets – Forecasting Prediction Markets By News Content Analysis – (PDF file) – by Ari Gilder and Kevin Lerman – 2007-xx-xx

Abstract

We present a system for predicting price fluctuations in Prediction Markets, such as TradeSports and the Iowa Electronic Markets. Our approach utilizes both market history and public news articles, published before the beginning of trading each day, to produce a set of recommended investment actions. Since there is evidence that prediction markets are very good indicators of future events, we hypothesize that the converse is true: past/present events can potentially assist in predicting future prices in these markets. We empirically show that these markets are surprisingly predictable, even by purely market-historical techniques. Furthermore, analyzing relevant news articles captures information independent of the market’s history, and combining the two methods significantly improves results. Capturing this signal from news articles requires some linguistic sophistication – the standard naive bag-of-words approach does not yield predictive features. Instead, we use part-of-speech tagging, dependency parsing and semantic role labeling to generate features that improve system accuracy.

We evaluate our system on eight political markets from 2004 and show that we can make effective investment decisions based on our system’s predictions, whose profits greatly exceed those generated by a baseline system. Additionally, our market prediction system can be applied to any Prediction Market with a known end date and for which a set of relevant entities (people, places, or things) can be defined.

Previously: Today&#8217-s prediction markets are far from being efficient.

Author Profile&nbsp-Editor and Publisher of Midas Oracle .ORG .NET .COM &#8212- Chris Masse&#8217-s mugshot &#8212- Contact Chris Masse &#8212- Chris Masse&#8217-s LinkedIn profile &#8212- Chris Masse&#8217-s FaceBook profile &#8212- Chris Masse&#8217-s Google profile &#8212- Sophia-Antipolis, France, E.U. Read more from this author&#8230-

Read the previous blog posts by Chris. F. Masse:

  • Car manufacturer Renault (Nissan’s twin) is now a NewsFutures client.
  • Nokia’s Enterprise Prediction Markets = Competitive Advantage
  • Comments are now completely open on Midas Oracle.
  • Albert Einstein, Chairman of the Midas Oracle Advisory Board
  • Erratic –but not Stochastic– Charts
  • Barack Obama is the 44th US president.
  • We already have prediction markets in future tax rates. It’s called the municipal bond yield curve.