On the Future of Hedging — Castle
castle.tech · 829 words · saved by 1 readers
On the Future of Hedging — how enterprise hedging flow turns prediction markets into the venue for transferring discrete event risk.
I. Thesis Markets are the correct venue for pricing discrete uncertainty. The same mechanism that surfaces information about stock prices should surface information about tariffs, sanctions, regulatory rulings, and geopolitical outcomes. In practice, it does not. Contracts on the events that matter to real businesses sit thin and wide, traded mostly by speculators and almost never by the institutions whose balance sheets are actually exposed. The instrument is not wrong. The flow is wrong. Financial markets work because participants enter with heterogeneous motives. Some trade on edge.…
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