DIY enterprise prediction markets as revelators of institutional lies

Posted on June 10, 2008 by admin

Adam Siegel of Inkling Markets:

Mike,

The context of that discussion was talking about allowing people to create their own markets vs. having them only be run by a central entity or only through recommendations by a consulting firm.

We were also talking about the insights you may get by running prediction markets that are not readily apparent in the market results.

The original point was, by allowing people to ask as many questions as possible, the questions may be a signal themselves pointing to something that you didn’t previously know about. If someone asks a question about the probability of a risk factor occurring that you never even considered before, for example. That would never have been uncovered, otherwise, because the “prediction market administrators” wouldn’t even have known to ask.

–

BetFairs brand-new bet matching logic

Posted on June 9, 2008 by admin

BetFair:

Betfair Customer Services 06 Jun 15:55

We held a forum Q&amp-A session in March in which we announced that we were working on an improved version of bet matching. This would allow us to match bets across selections, and to match those bets at better prices than requested where possible, as we do now when matching back bets against lay bets on the same selection. We wanted to provide customers with an update on our progress towards this.

An example of how this would work in practice:

You submit a bet request to back Roger Federer at 1.7, but there are no unmatched lay bets on Federer at 1.7 or higher to match your bet. However, we do have an unmatched customer request to back his opponent at 2.2 already on the system. The way matching works currently there are two possible outcomes:

1. your bet will remain unmatched, or
2. another customer will subsequently lay your bet, and it will be matched at 1.7, the price you requested.

With the improved bet matching process we would match your request to back Federer against the customer looking to back his opponent at 2.2, and provide an improvement to the price you requested. Your bet would be matched at the best possible price that is a valid increment on Betfair’s odds ladder, in this case 1.83.

As we mentioned during the Q&amp-A, doing the necessary calculations for an individual bet on a market with only two selections is relatively simple. However bet matching has to work efficiently in much more complex situations: i.e. in markets with many runners, where bets may be partially matched, and matched against bets at more than one price. We also understand that customers would expect no deterioration in the overall performance of bet matching as a result of us adding this functionality. It’s taken us a little longer than we originally hoped to find a solution that meets all those objectives. However we’ve coded a new version of bet matching, and our performance tests on the new process indicate that it will match backs against lays and bets across selections more efficiently than the existing bet matching process.

We are now into the final few weeks of testing, and expect to be ready to introduce this improvement to the site in early July. Again as we mentioned in the Q&amp-A it was a higher priority for us to find a way to provide price improvements for customers than to resolve issues around the withdrawal of non-runners, so we don’t intend to match bets across selections in horse racing markets in the near future. We’d therefore expect most situations where we would match across selections to occur in the busiest 2- and 3-runner markets, including football and tennis. It’s a busy month ahead for both those sports, and as we believe it’s prudent not to introduce this change at peak times we’ve taken the decision to wait until Euro 2008 and Wimbledon are completed. If Wimbledon is completed on schedule, and assuming remaining testing goes to plan, we expect to make this change to the site on Monday 7th July. We will confirm this nearer the time, but wanted to give customers advance notice as we’ve previously promised.

Thank you for your continued feedback.

–

More Old Info:

– Michael Robb

– Tony Clare

–

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

–
–

For comparison, InTrade:

2 days after my ringing the alarm bell… THE FREE FALL

Posted on June 6, 2008 by admin

– My first warning: June 4. + My second warning: June 4, later that day. + My third warning: June 5.

– Now, spot the timeline in the event derivative chart below.

–

Take that, Mike R.

–

TAKEAWAY: If you are a UK-based or British trader on prediction markets, don&#8217-t believe a single word of what UK-based or British bloggers say about US politics. Go to US-based or American blogs to get the information you need to inform your US bets.

If you followed that British blogger, you&#8217-d be in the red today.

Get your information from sources close to the action &#8212-not one ocean away.

Get your information from vibrant sources who use intelligently both the information technology and the wisdom of crowds to comprehend the news &#8212-see my point #5 on yesterday&#8217-s post.

Pay attention to what I&#8217-m going to say in the coming weeks about &#8220-prediction market journalism&#8220-. Thanks.

–

Dont trade on the VP predictions markets. – Dont bet on Hillary Clinton as VP. – Dont listen to betting bloggers who tell you that Hillary Clinton has a chance to be on the Democratic ticket. – Dont believe in vice presidential selection committees. – Select well your primary, advanced indicators. –

Posted on June 5, 2008 by admin

The topic of this post is:

Betting &amp- Information

–

#1. Don&#8217-t trade on the VP predictions markets.

I have stong reservations about those VP prediction markets. Only 2 men in the world know what is going to happen: Barack Obama, and John McCain.

You can&#8217-t divine their final thoughts.

Politicians often lie about their intentions &#8212-they also change mind, frequently.

The decision to name one VP nominee could be made in secret &#8212-without any early warnings.

Surprise is a card that Barack Obama and John McCain could play. Don&#8217-t bet against their final will.

–

#2. Don&#8217-t believe in &#8220-vice presidential selection committees&#8221-.

Last time, in 2000, a man named Dick Cheney was appointed to head George W. Bush&#8217-s vice presidential selection committee.

He was supposed to scout around to find and assess good candidates.

Surprise, surprise, that fake committee ended up putting Dick Cheney on the Republican ticket &#8212-and the rest is history (Iraq war, etc.).

–

#3. Don&#8217-t bet on Hillary Clinton as VP.

She does not have the slightest chance.

It&#8217-s highly unlikely that Barack Obama selects her on the Democratic ticket.

Hillary Clinton as VP nominee (and as VP) would present many quasi insurmountable problems.

–

#4. Don&#8217-t listen to betting bloggers who tell you that Hillary Clinton has a chance to be on the Democratic ticket.

They are clueless.

Don&#8217-t read clueless people. They are a waste of time.

–

#5. Select well your primary, advanced indicators.

Go to the sources of information. Discard filters. Your insatiable curiosity should drive your search for information.
Use technology to select the best news articles out there. Bookmark Memeorandum for US politics (and TechMeme for information technology) &#8212-they use bloggers&#8217- links to select what&#8217-s hot, a bit like Google&#8217-s PageRank does.
Use the crowd to sense what&#8217-s hot or to discover marginally interesting tidbits. I have 56 friends on Google Reader who share their best items with me. I got many interesting stories that way, every day, from sources I would have never known about, otherwise. (Plus, I receive many e-mails each day from potential sources.)

–

#6. Choose your bets (and trades) carefully.

Just because an event derivative is cheap doesn&#8217-t mean that it&#8217-s a good bet.

Don&#8217-t pluck down money on a bet unless you&#8217-ve seriously researched the topic by yourself &#8212-and possesses some expertise or experience in that field.

–

FOLLOW-UP POST: 2 days after my ringing the alarm bell… THE FREE FALL

–

InTrade

–

Democratic Vice President Nominee

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

–

Republican Vice President Nominee

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

–

BetFair

–

Next Vice President:

–

Democratic Ticket

–

Democratic Vice President Nominee

–

Republican Vice President Nominee

–

NewsFutures

–

Barack Obama will pick a woman as running mate.

© NewsFutures

–
–

Explainer On Prediction Markets

–

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.

–

The Wikipedia entry on prediction markets looks like a messy Marrakesh bazaar. – Shame on all members of the field of prediction markets -including the author of this present, finger-wagging post.

Posted on June 1, 2008 by admin

The Wikipedia entry on prediction markets does not seem to be well maintained.

Here are the warnings that welcome visitors. The first of the 2 warnings has been up since November 2007 &#8212-that&#8217-s 7 months ago!!!!!!

–

And the definition opens on the big myth, create by IEM, and perpetuated by some scholars:

Prediction markets are speculative markets created for the purpose of making predictions.

–

It&#8217-s a big myth.

The TradeSports and BetFair prediction markets were primarily created to satisfy the traders &#8212-their predictions come as an interesting offspring.

–

Is Big Brother being fixed in Great Britain? And are the alleged fixers using BetFair to make a fast buck (or quid, as they say in the U.K.)?

Posted on May 31, 2008 by admin

Via Ed, The Daily Mail:

The Daily Star reveals that some punters are set to earn more than half a million pounds after a total bet of ?971 was staked via BetFair on Nikki to win at 1000-1 shortly after she was voted out of the house. […]

Rumours of &#8216-insider dealing&#8217- on BetFair chat forums continue to surround the clued up gamblers who stand to win ?582,250. […]

–

That &#8220-Nikki&#8221- was evicted, an later on re-instated in the game.

Hence, the questions about the traders who did bet on her, after her eviction. Did they &#8220-know&#8221- something that the other traders didn&#8217-t?

On the other hand, it&#8217-s a constitutional right for Joe A. Doe to bet ?971 on a loser. Many do that every day at the horse race track. We should not accuse people of insider trading (or corruption) without any evidence.

BetFair employs many specialists in their &#8220-integrity team&#8221- to deal with such occurrences.

–

Extreme Prediction Markets & Ethics

Posted on May 30, 2008 by admin

While Robin Hanson was busy signing Bob&#8217-s petitions and blablabling on philosophy, Jason Ruspini answered the questions.

Jason Ruspini (&#8221-The Brain&#8221-) has established himself as one of the experts in the field of prediction markets. Listen up.

–

1-2) These markets could have insider trading restrictions and forced settlement w/ new contract set.
.
3-4) The CFTC/NFA could monitor a “large trader” list and have special reporting requirements for them. If trading seemed unreasonable given the objective outlook for a candidate, they could begin an investigation.
.
5) Don’t void or unwind the market, just settle the contracts at the price immediately before the event and then start a new set of contracts as soon as possible.
.
The only problem there is what happens when a price manipulation precedes an event such that the manipulated outcome locks-in the “manipulated” prices. The arrangements in 3-4) would go a long way towards addressing that scenario. Failing that, contracts could be worded in such a way to allow for freezing funds and unwinding trades in that sort of situation. Also, it would be difficult for a trader to set-off a feedback loop in a liquid binary market even if they were very large.

He asks questions; youll provide answers.

Posted on May 29, 2008 by admin

I would like to ask the U.S. contributors to Midas Oracle what they would make of a prediction market for the 2012 Democratic nomination where one contender was backed heavily, at any price, despite losing every single primary heavily for months.
–
The Democratic nomination is only a once every four years event, but similar things to this happen regularly on tennis markets in the last 12 months.
–
The questions are
–
(1) What if Hillary Clinton herself wagered millions of dollars that she would not be the next Democratic candidate?
–
(2) What if someone had the power to knock Hillary Clinton out of the race somehow had wagered millions on her not being the 2012 candidate? An example where this could happen would be the tournament where a spectator knifed Monica Seles during that tennis match in the early 90s. She would then not be able to win that tournament, but what if there is a financial incentive for people to injure participants, like with Seles? Or if someone assassinated Clinton? Should that market be paid out?
–
(3) Should people be able to bet in near unlimited size on prediction markets, who weren’t regular bettors/traders? If it is a brand new account waging a quarter of a million dollars on a tennis player to lose, should that account have been restricted before placing that bet?
–
(4) Should there be circumstances where a multi-million pound gamble is paid out on Obama 2012, if over a period of a number of months, someone had backed him heavily to win the nomination, even though he was losing every single primary?
–
(5) If someone knifed Maria Sharapova, as happened with Monica Seles, you could make the argument that bets on that tournament should be void, if the knifeman has bet heavily on Sharapova not to win it, and because of her being knifed, she then doesn’t make the final and win. However, you could then reach a situation where someone injures a player deliberately, expecting that a prediction market would be voided, which they could also benefit from financially. A situation like this occurred in England in the seasons 1995/1996 and 1996/1997, where floodlights at soccer games were deliberately sabotaged, forcing abandonment of the matches concerned, as a result of the saboteurs not liking the half time scoreline. There is an incentive for someone to bet heavily against a Seles or a Sharapova, and then seriously wound or assault them to alter the outcome of a sports prediction market, but there is also an incentive to try to get a prediction market voided. The knifeman benefits from ensuring that Sharapova or Seles cannot win the tournament, but the saboteur benefits from the market being voided. The answer to the first one is probably to void the market due to foul play, removing the financial incentive to knife a female tennis player, but the chance to get a void market will provide a financial incentive to try to get the event abandoned,………. how should the arbiters of a prediction market put the right safeguards in place to remove financial moral hazard from the market?

Answer these questions below this present post or here.

–

JASON RUSPINIS CROCKERY: The Brain states forcefully that they are not event futures, but binary options. Still, as soon as he premieres prediction markets on tax rates at InTrade, he calls them tax futures -of course.

Posted on May 27, 2008 by admin

–

Measured Enthusiasm for Prediction Markets – (PDF file) – by Jason Ruspini.

–

My thoughts:

Peter McCluskey thinks they are &#8220-futures&#8221-.
PAM was only extremely marginally about &#8220-terrorism and assassination futures&#8221-.
Even though they don&#8217-t do much more than discounting known information, &#8220-prediction markets&#8221- is not a misnomer, since the term means that each prediction (in the form of an event derivative contract) is traded on a market.
&#8220-Decision-aid markets&#8221-, not &#8220-decision markets&#8221- &#8212-I&#8217-d leave that last denomination for Robin Hanson&#8217-s original idea, when the decision applies automatically, after the trading.
And what was Justin Wolfers&#8217- reasoning? Might we know? (And why did you swallow it?)
Which are the manipulation papers making &#8220-unrealistic assumptions&#8221-? Names, please.
Tax futures are great. But, who else in the world, other than mister Ruspini, believes that they can be fiscal hedging vehicles? (Not doubtful. Just asking. External links, please.)

–

Jason Ruspini on the regulation of US event derivative markets:

CFTC-like regulation would save these markets from having to navigate national and state gambling laws, but would come at the cost of flexibility. Some contracts would not be approved for political reasons even if they had demonstrable hedging utility and “economic purpose”.

Midas Oracle.ORG – Predictions & Innovation

Prediction Markets, Collective Intelligence, Innovation and Growth

Tag Archives: event derivatives