Pricing hurricanes?

Mish noticed the Jolts data, after third revision, so this is accurate.

The cross over is likely the Black Swan of multiple hurricanes.  Gulf insurance rates go up as we get two hurricane disasters over 20 years, insurance companies can nark the tail end of the asymmetric distribution. Black swan becomes gray swan, a congested crawl back due to potential hurricane. The southern gulf economies need a requant to accommodate the hurricane queue.

The requant should be minor except that it can be a  recession trigger, not a  cause. The other exception is the add on of California fires, as those come with continued drought.  

In sandbox the insurance costing becomes a prediction market. Under current system we have a re-insurance market.  

We need the shortest pricing path is to bet hurricane landfalls along the gulf for the current season. We use measured strength as significance measure.  The market mechanism generates the expected insurance denominations needed as if the gulf hurricanes came through a restricted channel and needed compressive coding to fit.  

Sand box can do this, it can price periodic predictions because it manages bets and bet congestion as congested queues thus price stabilized. Bets build up as data comes in during periodic hurricane season. But the machine hits traders with congestion fees and our Coasian theory tells us that stable queues everywhere make relative pricing uniform.

This goes to the heart of the theory of nothing. Hurricane alley really is a constricted channel.  Research everywhere seems to be solving these chaotic systems using the theory of nothing. They solve for the finite element orientations the channel itself needs, as if the hurricane and the data geek summing finite elements suffer the same 'algebra'. The data geek can now approximate hurricane algebra much better. Bettors rest assured no one has unpriced information on hurricane alley.


The ultimate  insider for hurricane betting is the weather geek getting first data look.  He is exactly like the LIBOR fixer, we want him to rig the prediction market, the geek will be driven to conduct the same betting algebra that hurricanes themselves use. Since we are entropy maximizing, we have the minimum variance algebra to price gulf storm insurance. Un the ultimate incarnation, the data geej is an escrow enforced protocol. But absent that, we want the data geek to have a smart cash card that he may thumb print his bet as the data comes in.