Let’s say I’m a middle aged financier, just been diagnosed with a terminal illness and my prognosis is that I have one year to live. I tally up all my assets and it amounts to $1M. I write down a bucket list and I estimate it would take $10M to complete all the items on my bucket list. I have no descendants or anyone I would want to leave any money to so all I care about is being able to complete all the items on my bucket list. Nobody knows about my prognosis and, due to medical privacy laws, I’m reasonably certain I can keep this a secret from everyone until I die.
Could I sit down and create a portfolio of naked shorts, derivatives and other futures that have a time horizon such that I could extract $10M of liquid cash from my $1M of assets and structure it so all of the calls would happen after I die? If so, what recourse does the counter-party have in this scenario and what kinds of things could they have done to mitigate their risk?
Assume in scenario A) I know I will die exactly 365 days from now and am 100% certain in this knowledge or scenario B) my prognosis is 90% of patients die within 6 months - 3 years so I need to figure out how to keep my shorts going until I die.
Scenario A seems much simpler to construct but scenario B is more realistic. Could I accomplish my goal in both scenarios? neither?