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Comments on: The Open Bank Resolution http://www.tvhe.co.nz/2013/07/04/the-open-bank-resolution/ The Visible Hand in Economics Thu, 18 Jul 2013 02:17:32 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Eric Crampton http://www.tvhe.co.nz/2013/07/04/the-open-bank-resolution/#comment-41316 Fri, 05 Jul 2013 02:12:00 +0000 http://www.tvhe.co.nz/?p=9018#comment-41316 In reply to Matt Nolan.

My bets, for what they’re worth:

Any main bank bailout, no OBR, before 2025
Bid: $0.05 Ask $0.20

Any main bank bailout, with OBR, before 2025
Bid: 0.03 Ask $0.10

Uncertainty within the bid-ask spread.

I expect there are lots of low-severity events that could be prevented by OBR, and a few low-probability events that trigger bailouts in both states. Hence the bigger reduction in asks than in bids across world-states.

As I’m not very confident in those, I wouldn’t put up high stakes.

]]> By: Matt Nolan http://www.tvhe.co.nz/2013/07/04/the-open-bank-resolution/#comment-41315 Fri, 05 Jul 2013 01:37:00 +0000 http://www.tvhe.co.nz/?p=9018#comment-41315 In reply to Eric Crampton.

Always agree with that

]]> By: Eric Crampton http://www.tvhe.co.nz/2013/07/04/the-open-bank-resolution/#comment-41314 Thu, 04 Jul 2013 20:49:00 +0000 http://www.tvhe.co.nz/?p=9018#comment-41314 In reply to Matt Nolan.

Nope. But I want to know what the proponents and opponents would pay for such a contract, as a way of benchmarking their beliefs. And if the numbers seemed too way out from your expectations, then hold them to it as a one-on-one bet.

]]> By: Matt Nolan http://www.tvhe.co.nz/2013/07/04/the-open-bank-resolution/#comment-41312 Thu, 04 Jul 2013 10:28:00 +0000 http://www.tvhe.co.nz/?p=9018#comment-41312 In reply to Eric Crampton.

That is a really good question – was there a contract?

]]> By: Eric Crampton http://www.tvhe.co.nz/2013/07/04/the-open-bank-resolution/#comment-41310 Wed, 03 Jul 2013 23:42:00 +0000 http://www.tvhe.co.nz/?p=9018#comment-41310 “Suppose iPredict had a contract out paying $1 in the event that there is any bailout of any of the major banks between now and 2025. Then suppose that RBNZ’s announcement of OBR were a complete surprise. By how much should the price of that contract have changed with the announcement?”

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