{"id":221,"date":"2008-01-04T09:04:10","date_gmt":"2008-01-04T17:04:10","guid":{"rendered":"https:\/\/bayesianinvestor.com\/blog\/index.php\/2008\/01\/04\/subsidized-intrade-contracts-conditional-on-presidential-election\/"},"modified":"2015-10-14T14:55:03","modified_gmt":"2015-10-14T22:55:03","slug":"subsidized-intrade-contracts-conditional-on-presidential-election","status":"publish","type":"post","link":"https:\/\/bayesianinvestor.com\/blog\/index.php\/2008\/01\/04\/subsidized-intrade-contracts-conditional-on-presidential-election\/","title":{"rendered":"Subsidized Intrade Contracts Conditional on Presidential Election"},"content":{"rendered":"<p>I have implemented subsidies to encourage trading of some conditional prediction market contracts that may provide useful information about the consequences of the 2008 presidential election, via a simple automated market maker (using an algorithm described near the end of <a href=\"http:\/\/hanson.gmu.edu\/ifextropy.html\">http:\/\/hanson.gmu.edu\/ifextropy.html<\/a>). The subsidized market maker ought to provide incentives for traders to devote more thought to these contracts than they would if the liquidity was less predictable.<br \/>\nIntrade has agreed not to charge any trading or expiry fees on these contracts.<br \/>\nSome places to look for extensive description of the motivations behind these subsidies are <a href=\"http:\/\/hanson.gmu.edu\/futarchy.html\">here<\/a> and <a href=\"http:\/\/www.overcomingbias.com\/2007\/05\/shock_response_.html\">here<\/a>.<\/p>\n<p>The contracts are:<\/p>\n<ul>\n<li>\n<a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=565200\">Oil Futures and PRESIDENT.DEM2008 prices will move in same direction on Election Day<\/a><br \/>\n<br \/>This will use the change in the December 2011 Light Sweet Crude Oil futures<br \/>\ncontract from the close before the election (Monday) to the close after the election (Wednesday). A price higher than 50 should suggest that a Democratic victory will cause oil prices to be higher than they otherwise would be, while a price below 50 should suggest that a Democratic victory will cause lower oil prices.<br \/>\n<a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=173055\">PRESIDENT.DEM2008<\/a> refers to the Intrade contract for &quot;Democratic Party Candidate to Win 2008 Presidential Election&quot;.\n<\/li>\n<li>\n<a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=565201\">Treasury bond interest rate futures and PRESIDENT.DEM2008 prices will move in same direction on Election Day<\/a><br \/>\n<br \/>This will use the change in the December 2008 30-year US Treasury Bond futures contract from the close before the election (Monday) to the close after the election (Wednesday). A price higher than 50 should suggest that a Democratic victory will cause bond prices to be higher (and long term interest rates lower) than they otherwise would be, while a price below 50 should suggest that a Democratic victory will cause lower bond prices (and long term interest rates higher) .\n<\/li>\n<li><a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=565198\">Number of US troops in Iraq on 30 June 2010 if a Democrat is elected president in 2008<\/a><\/li>\n<li>NONDEM.PRES-TROOPS.IRAQ: <a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=565199\">Number of US troops in Iraq on 30 June 2010 if a non-Democrat is elected president in 2008<br \/>\n<br \/>These are scaled claims whose value will range from 0 if the troop levels are zero to 100 if the troop levels are 200,000 (or more).<br \/>\n<\/a><\/li>\n<li><a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=565196\">Increase in US Government debt if Democrat elected president in 2008<\/a><\/li>\n<li><a href=\"http:\/\/www.intrade.com\/aav2\/trading\/tradingHTML.jsp?selConID=565197\">Increase in US Government debt if non-Democrat is elected president in 2008<\/a><br \/>\n<br \/><b>Note<\/b> that the change in debt is usually quite different from what<br \/>\nis reported as the budget deficit. The debt numbers will be taken from a<br \/>\nsource such as the<br \/>\n<a href=\"http:\/\/research.stlouisfed.org\/fred2\/series\/GFDEBTN\">St. Louis Fed<br \/>\nSeries GFDEBTN, Federal Government Debt<\/a><br \/>\n<br \/>\nThese are scaled claims whose value will range from 0 if the debt does not increase to 100 if the debt increases by $1 trillion (or more).\n<\/li>\n<\/ul>\n<p>Please read the detailed specifications at Intrade before trading them, as one-line descriptions are not sufficient for you to fully understand them.<br \/>\nFor the first two of those contracts, the market maker will enter bids and asks of 38 contracts, and can lose a maximum of $5187.76 on each contract. For the other four contracts, the market maker will enter bids and asks of 115 contracts, and can lose a maximum of $7906.25 on each contract.<br \/>\nI will maintain a web page <a href=\"https:\/\/bayesianinvestor.com\/amm\/\">here<\/a> devoted to these contracts.<br \/>\nSee also <a href=\"http:\/\/www.overcomingbias.com\/2008\/01\/presidential-de.html\">this more eloquent description on Overcoming Bias<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I have implemented subsidies to encourage trading of some conditional prediction market contracts that may provide useful information about the consequences of the 2008 presidential election, via a simple automated market maker (using an algorithm described near the end of http:\/\/hanson.gmu.edu\/ifextropy.html). The subsidized market maker ought to provide incentives for traders to devote more thought [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[17,15],"tags":[151,152,124],"class_list":["post-221","post","type-post","status-publish","format-standard","hentry","category-if","category-us","tag-amm","tag-best-posts","tag-prediction-markets"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p80O1l-3z","_links":{"self":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/221","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=221"}],"version-history":[{"count":1,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/221\/revisions"}],"predecessor-version":[{"id":591,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/221\/revisions\/591"}],"wp:attachment":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=221"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=221"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=221"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}