Abstract
Parimutuel matching has been used successfully for over 100 years for wagering on horse races, and it has been in use for trading derivatives in the financial markets since October 2002. This chapter describes these applications in more detail. Section 3.1 discusses how parimutuel matching has been used in the wagering arena to date. Section 3.2 reviews recent mathematical innovations that make parimutuel matching more suitable for trading derivatives. Section 3.3 provides an overview of how parimutuel matching is applied today in the derivatives markets. Section 3.4 discusses some closely related derivatives markets to those that use parimutuel matching, and Section 3.5 describes other trading mechanisms that are similar to parimutuel matching. Section 3.6 concludes with possible reasons for the relatively tardy introduction of parimutuel matching to the derivatives markets.
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Notes
For further information, see the newspaper articles by Wessel (”New Futures Could Help Folks Insure Against Economic Risks,” Wall Street Journal, 5 September 2002)
Taylor (“Investors Will Now Find Surprises Less of a Shock,” Financial Times, 24/25 May 2003), and the editorial by Thind (2002).
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© 2007 Ken Baron and Jeffrey Lange
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Baron, K., Lange, J. (2007). Parimutuel Applications. In: Parimutuel Applications in Finance. Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230627505_3
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DOI: https://doi.org/10.1057/9780230627505_3
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-52000-8
Online ISBN: 978-0-230-62750-5
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