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Revision as of 18:10, 24 May 2010 (view source) Dorit.Geifman (Talk | contribs) (→Market size) ← Older edit		Revision as of 18:38, 24 May 2010 (view source) Dorit.Geifman (Talk | contribs) (→How do they work?) Newer edit →
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	=== Security types ===		=== Security types ===
		+	The security type defines the payoff model. It can be one of the following:
		+	* '''[[:Category:Winner-takes-all securities|Winner-takes-all]]''' – the security is cashed out at a predefined price if its underlying event occurred, and is nullified otherwise. This model has been the most commonly used for binary (Yes / No) or multiple-option contracts.
		+	* '''[[:Category:Index securities|Index]]''' – also known as linear security. In this case the price of the security reflects the estimated value of the outcome and its payoff is tied to the actual outcome of the event.
		+	* '''[[:Category:Volume Weighted Average Price (VWAP)|Volume-Weighted Average Price]]''' – the security is cashed out according to its average price weighted by transaction volume in X days prior to its expiration date. This method is used mostly in idea / opinion markets, when there is no absolute truth that can be used as a reference for cashing out the market
		+	* '''[[:Category:Conditional securities|Conditional]]''' – the outcome of these securities is evaluated according to a combination of events i.e. the security pays $1 if some event happens conditionally to the occurrence of some other event.
	=== Trading currency ===		=== Trading currency ===
		+	The currency that is used for trade execution may be:
		+	* '''[[:Category:Real-money|Real-money]]''' – trader’s money or play-money with a well defined monetary exchange rate.
		+	* '''[[:Category:Play-money|Play-money]]''' – which is not directly tied to the final reward.
	=== Trading funds ===		=== Trading funds ===
		+	The source of the funds which are available to the traders may be:
		+	* '''[[:Category:Limited own funds|Limited own]]''' – traders invest their own money, but the amount is limited by the market institution
		+	* '''[[:Category:Unlimited own funds|Unlimited own]]''' – traders invest their own money and the amount is unlimited
		+	* '''[[:Category:Initial capital endowment|Initial capital endowment]]''' – traders are endowed by market institution with initial capital, usually play-money.
		+	* '''[[:Category:Initial securities endowment|Initial securities endowment]]''' – traders' accounts are initialized with a number of securities.
	=== Market size ===		=== Market size ===
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	=== Interaction ===		=== Interaction ===
-		+	Does the market platform or trading procedure enable complementary information exchange between traders?
-	=== Prediction Market Architectures ===	+	* '''[[:Category:No interaction|No interaction]]''' – platform does not facilitate interaction among traders. Traders are instructed to refrain from off platform interaction.
-	The different nature of Prediction Markets, mainly its special attributes stemming from it being used as an information aggregation mechanism, drove researchers to reconsider the traditional market architectures and propose some new market models. The main issues that have been addressed are market liquidity and number of traders, its quality as an information aggregation platform and the risk taken by market institutions.	+	* '''[[:Category:On-platform interaction|On-platform]]''' – the platform provides for online interaction means such as chat or forums.
-	This section will first outline the basic market models and then describe the architectures that have been proposed and are used for Prediction Markets. For each model, data or platforms suitable for research purposes will be mentioned.	+	* '''[[:Category:Off-platform interaction|Off-platform]]''' – traders may exchange views outside the market about the events being traded.
-		+
-		+
-	==== The Iowa Electronic Markets model ====	+
-	The Iowa Electronic Markets (IEM) is operated by the University of Iowa, the Henry B. Tippie College of Business, as part of its research an teaching mission. Consequently the exchange is run as a non-profit operation.	+
-	The contracts are issued for trading by means of '''unit portfolios''', which consist of one of each of the contracts as defined in the market prospectus. The price of the unit portfolio is the guaranteed aggregate liquidation value of the its contracts. At any point in time the trader can buy or sell the IEM exchange these unit portfolios through a fixed price bundle order. Once a trader buys the unit portfolio the contacts are put into circulation and executed upon through the different market actions.	+
-	The market actions that are available to the trader are:	+
-	* '''Fixed price bundle orders''' – a request to buy or sell the IEM exchange a set of contacts which form a unit portfolio at a fixed price that is the guaranteed aggregate liquidation value of the assets within the unit portfolio.	+
-	* '''Market price bundles orders''' – a request to simultaneously buy or sell a set of contracts which form a unit portfolio at their respective market prices	+
-	* '''Limit orders''' - a request to buy or sell a contract at a specified price for a specified period of time	+
-	* '''Withdrawing of outstanding orders'''	+
-	* '''Market orders''' – requests to buy or sell contracts at the current ask and bid prices	+
-		+
-	=== Contract payout structures ===	+
-		+
-	==== Linear ====	+
-		+
-	==== Winner-takes-all ====	+
-		+
-	=== Incentive Models ===	+
	== Is it Reliable and Accurate? ==		== Is it Reliable and Accurate? ==

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Revision as of 18:38, 24 May 2010