Wednesday, February 2, 2011

Introducing News Shocks

A couple of people (Priyesh and Gary) questioned why there is not a process by which shocks to the market can be introduced to the proceedings. One idea is to introduce news over and above the stochastic evolution of the two packs. This would only work in a training environment rather than where money is used.

So, the idea would be for the News Person (call CN short for CNN) to control the flow of external information that will have an impact on the price of the final contract. The CN should therefore start rumours, for example "Research piece is coming out that suggests the market has run its course", or "I am hearing rumours that there is a break in supply". CN can start a rumour anytime and with anyone with the sole purpose of injecting some short-term spikes in the market.

Once CN has started a rumour, he can at any time announce the news on a whiteboard next to the pit and add a numbered card to the mix of cards except that it remain unturned. The direction of the move needs to match the bias of the rumour (e.g. supply shortage = positive move) size of the movement is at CN descretion and can be between -15 and +15 but should match the severity of the rumour.

It will be interesting to see how many instantly react to the rumour, also there is the outstanding question of whether the card should immediately be turned over. I am against it on the ground that this is a futures market.

Also I would have a senior person who has elected himself to maintain order as an idea candidate.

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