The Hurricane Market

A new prediction market has been born. Truck and Barter notes that The University of Miami has launched a hurricane futures market.

MAHEM is the Miami Hurricane Event Market, a futures trading market for hurricane landing sites. Meterologists, students, and Joe Public are all allowed to create an account and purchase up to $500 worth of securities with a payoff tied to a specific hurricane behavior.

Their concept is very interesting in that it ties a monetary incentive to the accuracy of a prediction. Hopefully this encourages more accurate forecasting. Fortunately the $500 limit prevents people from using the market to hedge their bets against actual hurricane damage.

The site was created by to economics professors and one meteorology professor and is being run by the Iowa Electronic Markets

It looks like they only have markets for the location of hurricane landfall. I think it would also be useful to have a market for hurricane strength. If there is enough volume then there could be individual markets for each strength and location combination.

Tag: Prediction Markets