Wed 5 Mar 2008
Finance Articles Worthy of Eph Multidisciplinary Minds – For Finance Professionals and Enthusiasts
Continuing with the sports theme - here’s another finance-related article that talks about a novel market in options on Final Four and Super Bowl tickets. There are interesting implications including a “prediction” that Giants would win over Patriots. (We all know that was just luck!)
http://allaboutalpha.com/blog/2008/02/17/alpha-in-final-four-tickets/
(For the uninitiated, these options, for a proportionately small fee, give the holder a right to purchase tickets at a certain price in the future. That certain price would of course be set much lower than the price of the ticket at game time.)
March 5th, 2008 at 8:36 pm
Sounds like an illegal lottery.
March 5th, 2008 at 10:30 pm
Hey Frank - that’s certainly possible. I haven’t done the research, but I will guess it is legal. So even though there is a probability / betting component, I think it is fine because there is a physical deliverable at a predetermined price.
The real question is how accurate they’ll be in predicting the outcome - there certainly won’t be much liquidity.
March 6th, 2008 at 6:05 am
The 3 elements of an illegal lottery are a) payment of consideration, b) existence of a prize and c) determination by chance. The relevant question in the subject scheme is “does the selection of one’s team constiute an exercise of such substantial skill that for the purposes of the law the outcome is taken out of the realm of chance”? Research would probably cast light on the answer to this question, but I ain’t going to do it.