Prediction Markets

This course will examine prediction markets, which are platforms on which traders can buy and sell binary options---contracts that pay a fixed amount if a referenced event occurs, and nothing otherwise. It will cover the history and structure of such markets, the interpretation of prices as probabilities, the accuracy of forecasts, the processes that bring prices into alignment across exchanges, the opportunities and incentives for insider trading, spoofing, wash trading, and other manipulative behavior, and the interactions that these platforms facilitate in a polarized society.