Predictions on Bank Failures
July 24, 2008
Intrade is a prediction market website where visitors can trade on the likelihood on the outcome of current events in the areas of politics, economics, finance, entertainment, weather, and more. Members buy contracts with real money with a price of 100 indicated the "event" occurred and a price of 0 indicating the event did not occur. A contract trading at a price of 80 correlates such that the Intrade market is factoring in an 80% of that event occurring. For instance the price to buy a contract on Barack Obama winning the US presidential election is 65. If it becomes more likely Obama will be elected president that contract will increase in value and the contract holder can sell at a profit. If Obama is in fact elected president then the contract would have a value of 100. Recently Intrade added US Bank Failures as a trading category on banks identified by Intrade as potentially troubled. Recent prices on the contracts for individual banks failing include:
Bank United Financial 45
Downey Savings and Loan 45
FirstFed Financial 30
Regions Financial 15
Wachovia Corporation 15
US Bancorp 5
A number of banks are listed, but have not generated any trading yet. Those banks include:
First Horizon
Oriental Financial
M&T Bank Corporation
National City Corporation
Washington Mutual Bank
Zions Bankcorp
Right now the very low volume of trading on these contracts makes the information regarding the banks rather meaningless. However, if Intrade generates a lot of interest in this type of trading consumers can watch for their banks and the current prices on the contract of their bank failing as a precautionary measure. If nothing else not seeing your bank on this list is a good thing.
