For those of you in finance-we now have innumerable ways toinvest our money. We have investments like:
-stocks (long and short)
-puts and calls (bets on the future values of stocks and bonds)
-index options
-options on options, etc.
My question: would anybody be interested in investing in options on terrorist actions?
Here’s how it would work…we all know that fiancial markets tend to drop when terrorist attacks 9like 9/11) take place…knowing that a given index (like the DJA or NASDAQ) would drop if a major terrorist attack took place, could I seel options based on the probablilty of such attacks?
Such options would function much as insurance policies…you could opt to see an index basket of stocks, based on what would happen if Al-Queda blows up an embassy in Pakistan.
Sounds like a new way to invest…how do I set up such a market…how would I “make” a market for this type ofinvestment?
There are open markets for trading insurance risk. See for example Lloyd’s of London.
There was an investigation shortly after 9/11 about an unusually high number of short orders on American Airlines stock right before the hijackings. I don’t remember if anything came of it, though.
I think the terrorists beat you to it. I guess this would be the equivalent of “insider trading” :mad:
If you happen to guess right, you can expect to spend a few months in secret custody, unable to talk to your lawyer, broker, or family. Does that count as “working” in your book? If so, go for it.