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Outcomes
Market
Price
AI Fair
Value
Value
Edge
April 30
YesNo
March 31
YesNo
May 31
YesNo
AI Insights:
03.17 07:36 UpdatedFair Value Reasoning:
As time passes without a magnitude 7.0+ earthquake (as of March 17), the time value of the short-term option (March 31) decays rapidly. Based on a Poisson distribution model using USGS historical data (~15 events per year, or one every ~24 days), the probability of at least one event occurring in the remaining 14 days (to March 31) is approximately 44%, rising to ~84% for the next 44 days (to April 30) and ~96% for the next 75 days (to May 31). Current market pricing (March: 46c, April: 86c, May: 95c) aligns closely with statistical expectancy, with a slight premium likely accounting for the risk of earthquake clustering, indicating an efficiently priced market.
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Exotics
Predicting natural disasters is a niche area for the general public, less common than politics or sports. However, for those interested in catastrophe bonds, actuarial science, or geology, such predictions are not unusual. Due to the randomness and high impact of earthquakes, it holds some 'novelty' value but is not entirely absurd.
