A Prediction Market for Toxic Assets

10 years 16 days ago
A Prediction Market for Toxic Assets
We propose the development of a prediction market to provide a form of collective intelligence for forecasting prices for "toxic assets" to be transferred from Irish banks to the National Asset Management Agency. Such a market allows participants to assume a stake in a security whose value is tied to a future event. We propose that securities are created whose value hinges on the transfer amount paid for loans from the agency to a bank. In essence, bets are accepted on whether the price is higher or lower than a quoted figure. The prices of securities indicate expected transfer costs for toxic assets. Prediction markets offer a proven means of aggregating distributed knowledge pertaining to estimates of uncertain quantities and are robust to strategic manipulation. We propose that a prediction market runs in parallel to a pricing procedure for individual assets conducted by the government agency. We advocate an approach whereby prices are chosen as a convex combination of the...
Alan Holland
Added 16 Feb 2011
Updated 16 Feb 2011
Type Journal
Year 2009
Where AICS
Authors Alan Holland
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