Prediction markets as a tool for management of political risk
Peer reviewed, Journal article
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Original versionBergfjord, O. (2012). Prediction markets as a tool for management of political risk. The Journal of Prediction Markets, 2(2), 1–12. 10.5750/jpm.v2i2.438
Recently, several prediction markets for various events have been launched. The literature so far has focused on the predictive power of such markets. This paper considers such markets as tools for management of political risk. It outlines a model for use and pricing of such assets, and discusses the various benefits of a well-functioning, liquid prediction market for political decisions.