Volume 17 | Issue 1 | Article 1
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Hedging "Event" Risk
On May 1, 2008, the same day when Soviet tanks used to rumble through Red Square, the Commodity Futures Trading Commission announced that it will consider whether instruments that are related to the outcome of events such as elections, sporting contests or population growth should be blessed with its regulatory approval or should be branded as gaming contracts. Of course, nearly all of the existing “futures contracts” and “commodity options” within the CFTC’s remit involve patronage by large numbers of speculators, so the mere assumption of a foreign risk by people who could readily avoid it cannot be, in itself, a disqualification. Presumably, the outcome will hinge on whether any economic benefit inures from these instruments other than the thrill of the wager.
