Conventions for Creating FX Claims

General
Judging a claim should be easy.

Some techniques:
1. Link the judgement to a statement by another organization, such as the UN or a government
2. Link judgement to a newspaper
3. Link judgement to something well-defined

I wanted to make a claim about Michael Jackson such as "MJ will be found guilty of sexual abuse", but I was worried that he might plea bargain and only be found guilty of some lesser crime  So I made it more general, just "MJ gets found guilty of a felony".  You lose a little exactness, and if he isn't found guilty in the first trial you still have to wait for the end of the claim period to make a NO judgement, but it becomes a lot easier to judge.

Some things are really hard to write claims about.

Vague claims will get much less action.

Sense of Claims
The "sense" of a claim refers to which outcomes are linked to the positive and negative ends of the payout scale.

Disaster claims tend to pay positive for the event and negative for no disaster.  This seems reasonable, however it makes FX players look like they are hoping for a negative event.  I think futures markets would get much less bad press if all disaster/terrorism claims were written in the opposite sense - to pay out 100 if there is no disaster.  This would work because 90% of people don't understand selling short.  Keep in mind the other meaning of "positive" and "negative"!  Of course our correlation of "positive" with "a disaster happening" creates problems!

Claims about the an election should pay more for an incumbent win and less for a challenger.  For example, Bush04 pays 100 if Bush wins again and 0 if Kerry wins.

Scaled Claims
The payout of scaled claims should be magnified so that a small change in the event described will produce a large change in price.  For exmaple, a claim about the percent turnout in an election which pays .01 for every percent turnout would be uninteresting, since turnout doesn't vary by more than 10 or 20 points.  Much more interesting would be a scaled claim that paid between 0 for 50% and 100 for 60% turnout, so a 1% change in turnout gives a .10 change in the price.  All or nothing claims use all of the possible payout range; the less of the range you use the less the possible payout is.  The problem with scaled claims is that a lot of them don't use the full range, so they're not efficient investments.  Scaled claims that have a chance of hitting the max or min are better.

Scaled claims should have a payout chart.  Just giving an equation for the payout isn't good enough and will result in much fewer trades, since it requires everyone to do calculations on their own to understand the value of a share.

The less work you make people do, the more they will trade.  So the easier it is to go between real events and the price of a share the better.