There are now several statistical models and prediction markets generating forecasts for the upcoming presidential election, and they point to a very close race.
"Markets that reference prices in other markets are common in the world of finance of course—all stock options and index futures have this property. But when it comes to electoral prediction markets, I see no rationale for such derivative contracts."
Not sure this is a compelling argument. Election market derivatives can be used to infer expected uncertainty/volatility of a campaign, stability of a candidate's lead, momentum, etc. They are no less valuable than stock options or index derivatives that you referenced. If conventional derivatives are justified in terms of the information value they provide, it is no less true for election derivatives.
Given that we don’t yet have deep liquid primary markets, the idea that derivatives currently deliver anything like the value you describe is… speculative at best…😏
I would agree that if/when such primary markets were deep, there might be some value in such derivative markets.
I agree but it's a screenshot from Polymarket so not my choice of axis, the prices you posted are about right, you can download the exact data to check (I did this for the second figure)
I realized that after I went and looked. It also took an annoyingly long time to click in just the right spot on a mobile device to get it to tell me the prices in particular spots. Bad Polymarket! Y-axes are important!
some interesting developments w/r/t polymarket manipulation: https://x.com/fozzydiablo/status/1846647506446246089
"Markets that reference prices in other markets are common in the world of finance of course—all stock options and index futures have this property. But when it comes to electoral prediction markets, I see no rationale for such derivative contracts."
Not sure this is a compelling argument. Election market derivatives can be used to infer expected uncertainty/volatility of a campaign, stability of a candidate's lead, momentum, etc. They are no less valuable than stock options or index derivatives that you referenced. If conventional derivatives are justified in terms of the information value they provide, it is no less true for election derivatives.
Given that we don’t yet have deep liquid primary markets, the idea that derivatives currently deliver anything like the value you describe is… speculative at best…😏
I would agree that if/when such primary markets were deep, there might be some value in such derivative markets.
It would be really helpful to have y-axis ticks in that first image.
Just went and checked; looks like in the main move Trump dropped from 53 - 48; Harris jumped from 45 - 48.
I agree but it's a screenshot from Polymarket so not my choice of axis, the prices you posted are about right, you can download the exact data to check (I did this for the second figure)
I realized that after I went and looked. It also took an annoyingly long time to click in just the right spot on a mobile device to get it to tell me the prices in particular spots. Bad Polymarket! Y-axes are important!