Mt Albert by-election stocks

The Mt Albert is iPredict's first foray into conditional contracts, a sort of hydrid of indexed and binary type stocks.

Feel free to ask questions in this thread.

Also, see this post [www.ipredict.co.nz] on conditional stocks.

How to do arbitrage on these stocks.

Example: MTA.LEE, MTA.LEE.NAT, MTA.LEE.LAB

If ( price(MTA.LEE.NAT) + price(MTA.LEE.LAB ) ) / price(MTA.LEE) > 1, then you can be sure that:

either
price(MTA.LEE.NAT) + price(MTA.LEE.LAB ) will decrease,
or
price(MTA.LEE) will increase.



Edited 1 time(s). Last edit at 04/15/2009 06:22PM by bkd.

Yes, that looks right to me.

Crampton is the expert on this stuff.

It seems to me that bkd's arbitrage formula shouldn't work completely accurately because there is no MTA.LEE.OTHER stock.

i.e. the vote share for National and Labour will not add up to 100%, because some proportion of votes will go to another candidate.

Master: As far as I can figure out, that's precisely the reason why you can't arbitrage the "other way", e.g. buying/selling when (price(MTA.LEE.NAT) + price(MTA.LEE.LAB ) ) / price(MTA.LEE) is less than 1.

But it does work for when NAT+LAB/LEE is greater than 1. NAT+LAB should never be greater (on their own or even with an OTHER stock) than 1, so there does exist an arbitrage opportunity.

Thanks, gr.

I must say, I've lost money trying to do this, but that's to be ascribed to my incompetence.

Also, my statement of the relationship is inelegant. Instead of (NAT+LAB )/LEE > 1, try NAT + LAB > LEE.

Knowing the relation is only one part; devising a strategy to exploit it is a little trickier.

Hi all!

I'm having serious difficulty interpreting the prices on these stocks, and I'm wondering if anyone can help me out.

At the moment, the MTA.LEE.X stocks put National's vote-share above Labour's if Lee gets National's nomination.

Nat voteshare IF (close(MTA.LEE)=1) = (price(MTA.LEE.NAT) / price(MTA.LEE) ) = .4402
Lab voteshare IF (close(MTA.LEE)=1) = (price(MTA.LEE.LAB ) / price(MTA.LEE) ) = .4228

And the MTA.TWYFORD.X stocks put Labour's vote-share above National's if Twyford gets Labour's nomination.

Nat voteshare IF (close(MTA.TWYFORD)=1) = (price(MTA.TWYFORD.NAT) / price(MTA.TWYFORD) ) = .4438
Lab voteshare IF (close(MTA.TWYFORD)=1) = (price(MTA.TWYFORD.LAB ) / price(MTA.TWYFORD) ) = .6400

(Opportunity: NAT+LAB (given TWYFORD) > 100%. Either MTA.TWYFORD is underpriced, or one or both of MTA.TWYFORD.NAT & MTA.TWYFORD.LAB is overpriced.)

But the antecedents are not mutually exclusive; surely a Lee vs Twyford face-off is possible.

Say that happens: Lee gets the National nomination; Twyford gets the Labour nomination. Then, if the conditional stocks are priced right, Lee wins the seat, and Twyford wins the seat.

Harder question (for the experts *cough*Crampton*cough*): what's a suitable compatability relation that should hold between these stocks? Is it even possible to derive one without a jointly exhaustive & mutually exclusive candidate set for each party—i.e. MTA.OTHER.NAT etc?

If we're looking to add other potential candidates, TVNZ had a list for both parties on the news the other night.

BKD: I should be able to get to this on Wednesday. Sorry for the delays. Prepping up for a talk in Auckland on Tuesday. [offsettingbehaviour.blogspot.com]

Twyford not standing. MTA.TWYFORD, MTA.TWYFORD.LAB, and MTA.TWYFORD.NAT prices should all be hitting zero very soon. [www.kiwiblog.co.nz]



Edited 1 time(s). Last edit at 04/21/2009 05:00PM by bkd.

Admin - can we close the Melissa Lee nomination stock now????

I don't think Admin will be fast to close the stock...

Don't think it was specifically a nomination stock, but who would BE the candidate for the by-election.

Anything even while unlikely could happen before the by-election that causes National to need a new candidate, such as a death or illness that causes the need for another candidate could cause a bit of an issue if it had already been paid out?

"This contract pays $1 if Melissa Lee is selected as National's candidate in the Mt Albert by-election"

seems pretty clear to me - she was well & truly selected last night!

A very clear contract, there are no sub clauses.... resignation. illness.... etc.

Can we have a bundle for who is going to win the by-election, or does that to wait until the deadline so we know who officially who all the candidates are?

We dont need to wait for the final candidate list for a bundle, just need a "óther " option to cover all the little no hope parties.

MTA Lee should now be closed, any reason for the hold up admin?

all the little no hope parties

Ouch!

If we let them have a stock, then their party loyalists might buy them, providing more liquidity ... :-p



Edited 1 time(s). Last edit at 05/06/2009 06:23PM by pipe42.

Nominations don't open until May 12. Closing MTA.LEE would be premature.

Again the contract was '"if Melissa Lee is selected as National's candidate in the Mt Albert by-election"' she has been selected therefore the contract can close... even if she gets run over by a bus tomorrow and another national candidate is selected in her stead!

But!....and this is a very big But.... if there is no Mt Albert By-election in 2009 the contract will close at $0 - who knows we could have a revolution and a local Bainimara might take the reigns! LOL - stretching it a bit I know....



Edited 1 time(s). Last edit at 05/06/2009 08:58PM by corbusian.

Hi all, we closed the MTA.LEE stock this morning based on her selection a few nights ago.

Will be launching Mt Albert winner stocks later today.

Bargain-hunter(s) snapped up some MTA.WIN.GREENS stock this morning, sending the price to a peak of 3c before it dropped back again.

Bonus for bkd: trading on this stock has increased my net worth from 6c to 41c over the last fortnight. Yay me!

I cant understand the MTA.2nd.other prices, surely there is a better than 2% chance that labour will come second ????

Buying lots anyway on this basis, hope I havent misunderstood....

There's got to be a better than 7% chance the Greens will come second - the Colmar Brunton poll had them only 6 percentage points behind National, almost within the margin of error (4.4%): [tvnz.co.nz]

With Lee's showing thus far, there's got to be a sizeable chance a number of National supporters won't bother turning up to vote.

Also, surely, despite the poll, there's got to be a greater than 0.5% chance Labour will trip up and come second!

According to the MTA.WIN stocks, Labour's chances of winning are 96%, so it follows that their chances of coming second should be rated at approximately 3-4%. I suspect the reason the stocks don't follow this exactly is the favourite-longshot bias effect.



Edited 1 time(s). Last edit at 06/07/2009 09:14PM by pipe42.

But Labour are presumably a "longshot" at coming second, so they should be at over 3-4%.

Well, you're absolutely right - the theory only explains one half of what we observe. Hmm.

Perhaps we've just discovered a new phenomenon!

There's a 8% chance of greens coming second. I sold all my greens come second stock for 3 cents last week because I got sick of waiting for it to go back up to 8 cents.

I'm surprised the market hasn't responded to this morning's poll results. Surely the chances of the greens coming second must be higher than listed. I wish I had some cash...