Arbitrage in the InTrade Dem VP Market

Posted on August 19, 2008 by admin

There has been an unexploited arbitrage opportunity in the Intrade Democratic VP market (&#8221-2008 Democratic VP Nominee (others upon request)&#8221-). As the attachment shows, you can sell the slate of candidates for 123.2 (just sum the bids) while you will only have to payout 100. This possibility has existed for at least three weeks, and is particularly puzzling now given that the announcement is likely to occur this week.

What is also a bit odd is that Intrade has another market (&#8221-2008 Democratic Vice-Presidential Nominee (with Field contract)&#8221-) on the same outcome which includes a catch-all field contract which does not have the same arb&#8211-again see the attachment below. It is substantially cheaper to buy the field contract in the second market than the omitted candidates (Kaine, Sebelius, Hagel, Schweitzer, Gephardt, Kerry, and others) in the first market.

Any thoughts on why this is occurring?

attachment: intradedemvp_summedbidsexceed100.pdf

CNN closed their 2 VP prediction markets… and immediately opened 2 not-brand-new VP prediction markets, with a full listing of candidate names, this time.

Posted on August 4, 2008 by admin

In black, the comment made by the ubber president of the Pennock fan club. But I want Jason Ruspini to dissent in the comment area with another argument.

Posted on July 18, 2008 by admin

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UPDATE: He took the bait&#8230-

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InTrades market data shows that the sliding Dow Jones Industrial Average has an exceptionally strong negative correlation (approx. -0.91 over the last 10 weeks) with the rise in the InTrade Market for Barack Obama to be the next US President.

Posted on July 15, 2008 by admin

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UPDATE: Some smart comments, just below&#8230-

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I told you that vice presidential search committees and VP prediction markets are complete bullshit, didnt I?

Posted on July 15, 2008 by admin

The McLaughlin Group of mid-June (yes, I know, that&#8217-s last month):

MS. BERNARD: Well, here&#8217-s what I think. I think the dirty little secret is Barack Obama probably already knows who he&#8217-s going to select to be his vice presidential running mate. You put out the search committee, probably because Hillary Clinton was all over his back last week &#8211-

DR. MCLAUGHLIN: So this is a smokescreen. This is a smokescreen.

MS. BERNARD: I don&#8217-t know if it&#8217-s a smokescreen, but I think he has a good idea who his vice presidential running mate is going to be. And the search committee is much ado about nothing.

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I told you so.

No good advanced, primary indicators.

Don&#8217-t trade on VP prediction markets.

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US ELECTORAL MAP: Prediction Markets for the 2008 Electoral College

Posted on July 10, 2008 by admin

ELECTORAL COLLEGE MARKETS: Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland &#8212-(electoralmarkets.com).

By Lance Fortnow, David Pennock, and Yiling Chen.

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For more on probabilistic predictions, go to our &#8220-Predictions&#8221- page, or visit the prediction exchanges.

Alternatively, if you want an electoral map made of polls, go to electoral-vote.com.

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Bob Barr markets

Posted on June 26, 2008 by admin

Reason, a libertarian periodical, writes that the Bob Barr effect is &#8220-confirmed.&#8221- Because Obama&#8217-s campaign manager says it is.

Yes, pathetically a pro-market publication heeds the remarks of a political operative rather than markets that say Bob Barr will not make an impact.

Admittedly we have very little signal from prediction markets and lots of noise from political operatives, so writing about the latter makes for easier journalism.

There are now Intrade contracts on Barr&#8217-s share of the popular vote. Perhaps they&#8217-ll provide a little more signal, but I don&#8217-t have high hopes for reasonable trading volume &#8212- or for libertarian politicos embracing markets when the message of market prices might not correspond to their hallucinations.

VP conditional probabilities

Posted on June 26, 2008 by admin

BetFair is running markets on both who will be the next vice president and who will be nominated by the two parties.

As we&#8217-ve discussed before in other contexts, one can divide two probabilities like these to obtain a conditional probability: e.g., if the Democrats put X on the ticket, they will win the general election Y% of the time (where Y = odds of X becoming VP/odds of X being nominated).

These markets are thin, so the conditional probabilities should be taken with a grain of salt. But they are interesting nonetheless:

The pattern I see here is that conditional probabilities are higher for fresh faces (Webb, Sebelius- and arguably Bayh and Richardson despite their longer tenure) than for the old guard (Clinton, Nunn, Biden).

Of course, these should be viewed as correlations, not necessarily causal effects. For example, two possible explanations are: 1) putting a fresh face on the ticket helps Obama, either because there is less baggage or less of a contrast in national-politics resume length, or 2) Obama will only pick an old guard candidate in the state of the world in which he needs to shore up a weakness (i.e., picking Clinton to end a civil war, or Nunn to add foreign policy experience).
On the GOP side:

Huckabee has the highest conditional probability, and Pawlenty and Jindal are noticeably lower. Interpreting this one is harder: it depends on what aspect of Huckabee one thinks the market is expecting to be appealing (religion, likeability, Southernness, selective economic populism).

Technical note: the bids and asks reported above are actual quotes scrapped this AM- the mids are (bid+ask)/2, rescaled to add to 100 across all candidates.

The New Republic profiles the next Vice President of the United States of America -Jim Webb, maybe.

Posted on June 8, 2008 by admin

Via mister Bo Cowgill

The New Republic

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Some British betting bloggers are completely out of the loop.

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UPDATE: Andrew Sullivan on Hillary Clinton&#8217-s exit statement. (He liked it.)

UPDATE: InTrade forum thread.

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InTrade

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Democratic Vice President Nominee

Price for 2008 Democratic Vice-Presidential Nominee at intrade.com

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Republican Vice President Nominee

Price for 2008 Republican Vice-Presidential Nominee at intrade.com

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BetFair

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Next Vice President:

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Democratic Ticket

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Democratic Vice President Nominee

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Republican Vice President Nominee

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NewsFutures

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Explainer On Prediction Markets

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Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out&#8230- Intelligence in, intelligence out&#8230-

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.

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WEB EXCLUSIVE: – The annoted, historical, compound chart that those triple morons at the BetFair blog are hiding from their readers view. – It is located in a secret cache, linked to behind a picture of Hillary Clinton. – Curious place to locate a prediction market chart. – I bet nobody downloaded t

Posted on June 6, 2008 by admin

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For comparison, InTrade:

Midas Oracle.ORG – Predictions & Innovation

Prediction Markets, Collective Intelligence, Innovation and Growth

Tag Archives: 2008 US presidential elections