Intrade Election Forecast I

Nothing helps to focus the mind like money. Intrade, the web site that creates derivative markets for various events, has created derivatives for each U.S. state in the upcoming presidential election. These derivatives are based on which political party will win the electoral votes in a given state. The "price" of the derivative is the perceived probability of the event taking place, that is, the price ranges between 0 and 100. The current "price" in a given state therefore reflects the market's perception of which candidate is ahead in a given state. For example, if the current "price" for the Democratic candidate in New Mexico is 55, the market is saying that the perceived probability of the Democratic candidate receiving more votes than the Republican candidate in New Mexico is 55%. In other words, the market would in this case perceive that the probability of the Democratic candidate winning the most votes in New Mexico would be higher than for the Republican candidate.

We can therefore use these probabilities to show the market's perception of which candidate is ahead in the upcoming U.S. presidential election. The map below shows the market's perception of which candidate is ahead in each state as of June 7th:

The market believes that Obama would win the election, if it were held today, by a margin of 289 electoral votes to 249 electoral votes. I'll be updating this map on a weekly basis.