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Showing posts with label Markets. Show all posts
Showing posts with label Markets. Show all posts

7.03.2008

Iowa Electronic Markets

From Wikipedia, the free encyclopedia
How it works
Here are examples of contracts that the IEM traded, beginning June 6, 2006, concerning the 2008 US Presidential Election Winner-Takes-All Market. (The contract descriptions came from the IEM site.)
DEM08_WTA
$1 if the Democratic Party nominee receives the majority of popular votes cast for the two major parties in the 2008 U.S. Presidential election, $0 otherwise
REP08_WTA
$1 if the Republican Party nominee receives the majority of popular votes cast for the two major parties in the 2008 U.S. Presidential election, $0 otherwise
On the first trading day in January, 2007, the DEM08_WTA contract sold for 52.2 cents.
At this point, a speculator has a number of options.
1. He can simply buy a number of DEM08_WTA shares and wait for the results of the election. If the Democratic Party nominee receives the majority of popular votes in the 2008 Presidential Election, the speculator would have his contract liquidated and receive $1, for a profit of 48¢. If the Democratic Party nominee did not receive the majority of popular votes in the Presidential Election, then the speculator would receive nothing.
2. Alternatively, he could have bought shares intending to sell them later (before the election and the resolution of the share values) for a greater amount.
3. Another option would be to essentially short sell DEM08_WTA shares - if one considers the price of DEM08_WTA to be too high and incommensurate with the true probability of the popular vote going to the Democratic nominee, one can buy a "bundle" for $1. In this case, the bundle would be 1 DEM08_WTA and 1 REP08_WTA; the value of these two shares is guaranteed to be 1$ (as they will be cashed out as either worth $1 and $0, or $0 and $1). Hence to short sell, one would buy one bundle and then sell the overvalued items.
4. It is possible that a given market is simply irrationally priced. If the price of all the different shares is greater than or less than $1, then there is at least one share which is not correctly priced and so can either be shorted or gone long on. The price can be seen as the probability, and it doesn't make sense to have a total probability of greater than 100, and the markets are designed to cover all possibilities, so less than 100% doesn't make sense either. This is not necessarily true of all markets; in the Winner takes all markets this is true, but it is possible for the total value of 1 of every contract, which in 08_WTA is guaranteed to be $1, to exceed $1, such as in the markets dealing with share prices.
The IEM also trades futures based on financial markets, such as whether the Fed Funds rate will be raised at the following meeting.
[edit] Rules and limits
The IEM is not regulated by the CFTC (Commodity Futures Trading Commission) or any other agency. Because of the small sums wagered and the academic focus, the IEM has received two no-action letters that extend no-action relief. A speculator may put at risk in the IEM only between 5 and 500 USD. In contrast, other future markets like HedgeStreet are regulated by the CFTC and allow speculators to take on or offset financially significant amounts of risk regarding economic events or the prices of commodities.

Knowledge market

From Wikipedia, the free encyclopedia

The knowledge economy brings with it the concept of exchanging knowledge-based products and services. However, as discussed by Stewart (1996)[1], knowledge is very different from physical products. For example, it can be in more than one place at one time, selling it does not diminish the supply, buyers only purchase it once, and once sold, it cannot be recalled. Further, knowledge begets more knowledge in a never-ending cycle. Understanding of knowledge markets is beginning to emerge. As would be expected, they are very different in form from traditional markets.
Knowledge markets have been variously described by Stewart (1996)[1], Davenport and Prusak (1998)[2], and Simard (2000) as a mechanism for enabling, supporting, and facilitating the mobilization, sharing, or exchange of information and knowledge among providers and users. This transactional approach assumes that knowledge-based products or services are available for distribution, that someone wants to use them, and that the primary focus of the market is to connect the two.
This perspective is appropriate when the market has limited or no interest or control over either the production or use of the content being exchanged, as is the case for most traditional markets. A provider-user perspective is also appropriate for emerging social networking "ideagoras" (Tapscott and Williams, 2006)[3], in which the primary function of the market is to match existing solutions with problems and problems with those who can find solutions.
From a production perspective, processes for creating wealth through the use of intellectual capital are explained by Nonaka (1991)[4], Edvinsson and Malone (1997)[5], and Leonard (1998)[6]. At the marketing end of the spectrum, a number of authors, including Bishop (1996)[7], May (2000)[8], and Tapscott et al. (2000)[9] describe the architecture and processes necessary to succeed in a digital economy.
Knowledge markets may also be sequential in nature. Simard (2006)[10] describes a cyclic end-to-end knowledge-market model comprising nine stages that embed, advance, or extract value into knowledge products and services along a knowledge services value chain. The first five stages are internal to a knowledge organization (production and transfer) while the last four stages are external (intermediaries, clients, and citizens). Because the value chain cyclic, it can be used to model either a supply (post-production evaluation ) or a demand (pre-production evaluation) approach to knowledge markets.

[edit] Knowledge Services
Knowledge services is an emerging concept that integrates knowledge management, a knowledge organization, and knowledge markets. Knowledge Services are programs that provide content-based (data, information, knowledge) organizational outputs (e.g., advice, answers, facilitation), to meet external user wants or needs. Knowledge services are delivered through knowledge markets.
St. Clair and Reich (2002) describe internal knowledge services as a management approach that integrates information management, knowledge management, and strategic learning into an enterprise-wide function. Kalakota and Robinson (2003) and Thomas (2005) developed service-oriented architectures for the private sector. Their focus was to transform traditional retail businesses by developing enterprise-wide platforms that support customer services. RocSearch (2006) take a broader external view, referring to a nascent knowledge services industry that goes beyond traditional cost and time leveraging advantages of the traditional consulting sector.
Simard et. al (2007) developed a holistic systems model of knowledge services for government S&T organizations. The model begins with generating new content and ends with sector outcomes and individual benefits. The model is independent of content, issues, or organizations. It is designed at a departmental level, but is scalable both upwards and downwards. The primary driver is a department’s legal mandate; a secondary driver is the needs of clients and residents. The model can function from either a supply or demand approach to knowledge markets. There are two levels of resolution - performance measurement, and classifying service-related activities.
There are four types of knowledge services: generate content, develop products, provide assistance, and share solutions. Knowledge services are modeled as a circular value chain comprising nine stages that embed, advance, or extract value from knowledge-based products and services. The stages are: generate, transform, manage, use internally, transfer, enhance, use professionally, use personally, and evaluate. (Simard, 2007) described a rich to reach service delivery spectrum that is segmented into categories of recipients, with associated levels of distribution, interactions, content complexity, and channels. The categories, from rich to reach, are: unique (once only), complex (science), technical (engineering), specialized (professional), simplified (popular), and mandatory (everyone).
From the perspective of knowledge markets, Mcgee and Prusak (1993) note that people barter for information, use it as an instrument of power, or trade it for information of greater value. Davenport and Prusak (1998) used a knowledge marketplace analogy to describe the exchange of knowledge among individuals and groups. However, Shapiro and Varian (1999) indicate that information markets will not resemble textbook competitive markets with many suppliers offering similar products but lacking the ability to influence prices. Simard (2006) described knowledge markets as a group of related circular knowledge-service value chains that function collectively as a sector, to embed, advance, and extract value to yield sector outcomes and individual benefits.

Financial market

From Wikipedia, the free encyclopedia
In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient market hypothesis.
Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.
Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.
In Finance, Financial markets facilitate--
• The raising of capital (in the capital markets);
• The transfer of risk (in the derivatives markets);
• International trade (in the currency markets)
--and are used to match those who want capital to those who have it.
Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends

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