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 represents the imputed perceived likelihood of the partially uncertain future outcome (i.e., its aggregated expected probability). A 60% probability means that, in a series of events each with a 60% probability, the favored outcome is expected to occur 60 times out of 100, and the unfavored outcome is expected to occur 40 times out of 100.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism ---with or without an automated market maker.

Prediction markets enable us to attain collective intelligence. Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that the traders bring when they agree on prices. The event derivative traders are informed by the primary indicators (i.e., the primary sources of information), like the polls, for instance. These informed speculators then execute their transactions based on their anticipations about the future ---anticipations that will be either confirmed or infirmed.

The value of a set of prediction markets consists in the added accuracy that these prediction markets provide relative to the other meta predictive mechanisms, times the value of accuracy in improved decisions, minus the cost of maintaining these prediction markets, relative to the cost of the other meta predictive mechanisms. A highly accurate set of prediction markets has little value if some other meta predictive mechanism(s) can provide similar accuracy at a lower cost, or if very few substantial decisions are influenced by accurate predictions on its topic.

The Web CFM site

• ABOUT page on this site (CFM)
• ABOUT page at Midas Oracle .ORG
• Chris Masse's LinkedIn profile
• Chris Masse's FaceBook profile
• Chris Masse's Google profile

• Phone
  • +33 4-9365-4911
  • 04-9365-4911
• E-Mail Adresses
  • cfm |-at-| midasoracle |.|-com-|
  • chrisfmasse |-at-| gmail |.|-com-|
  • chrisfmasse |-at-| yahoo |.|-com-|
• Instant Messaging
  • chrisfmasse
• Web Adresses
  • http://www.midasoracle.org/
  • http://www.midasoracle.net/
  • http://www.midasoracle.com/
  • http://www.chrisfmasse.com/
• Global Headquarter
  Chris F. Masse
  Panorama B, Green Side
  305, avenue Saint Philippe
  Les Templiers, Sophia–Antipolis
  06410 Biot, Alpes-Maritimes
  France, European Union

• The Products
  • traded bets; traded predictions; event derivatives; event-driven derivatives; event derivative contracts; information derivatives; information derivative contracts.
• The Markets
  • bet markets; betting markets; event derivative markets; information derivative markets; prediction markets.
• The Exchanges
  • bet exchanges; betting exchanges; event derivative exchanges; information derivative exchanges; prediction exchanges.
• The Technology
  • market-based technology; trading engine; trading technology.
• Other Terms
  • binaries; binary, European call options; European binary options; binary event options; event futures; event-driven futures; idea futures; information futures.
• Inappropriate Terms
  • event markets; idea markets; information markets; opinion markets; predictive markets.
• Sub-Categories of Prediction Markets
  1. Decision markets are conditional prediction markets intended (by some idealists) to be used as a decision-making tool replacing human decision makers;
  2. Decision-aid markets are conditional prediction markets intended to be used as a decision-aid tool advising human decision makers.

• Vertical Portal To Prediction Markets
• Prediction Markets For All
• Prediction Markets For Enterprises
• Prediction Markets For People
• About CFM
• Chris F. Masse .COM