Analysts often use prices from various
markets as indicators of potential events. The use of petroleum futures
contract prices by analysts of the Middle East is a classic example.
The Policy Analysis Market (PAM) refines this approach by trading
futures contracts that deal with underlying fundamentals of relevance
to the Middle East. Initially, PAM will focus on the economic, civil,
and military futures of Egypt, Jordan, Iran, Iraq, Israel, Saudi
Arabia, Syria, and Turkey and the impact of U.S. involvement with each.
[Click
here for a summary of PAM futures contracts] (This is a
Javascript pop-up to the page I have archives here: ../pam-trade-info/ )
The contracts traded on PAM will be
based on objective data and observable events. These contracts will be
valuable because traders who are registered with PAM will use their
money to acquire contracts. A PAM trader who believes that the price of
a specific futures contract under-predicts the future status of the
issue on which it is based can attempt to profit from his belief by
buying the contract. The converse holds for a trader who believes the
price is an over-prediction – she can be a seller of the contract. This
price discovery process, with the prospect of profit and at pain of
loss, is at the core of a market’s predictive power.
The issues represented by PAM
contracts may be interrelated; for example, the economic health of a
country may affect civil stability in the country and the disposition
of one country’s military may affect the disposition of another
country’s military. The trading process at the heart of PAM allows
traders to structure combinations of futures contracts. Such
combinations represent predictions about interrelated issues that the
trader has knowledge of and thus may be able to make money on through
PAM. Trading these trader-structured derivatives results in a
substantial refinement in predictive power.
[Click
here for an example of PAM futures and derivatives contracts] (This
was a Javascript pop-up for a page pam_example.htm - but I couldn't
find it at the site or in Google's cache.)
The PAM trading interface presents A
Market in the Future of the Middle East. Trading on PAM is placed
in the context of the region using a trading language designed for the
fields of policy, security, and risk analysis. PAM will be active and
accessible 24/7 and should prove as engaging as it is informative.
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