A Case Study Using Nonfarm Payrolls

This chapter analyzes parimutuel derivatives auctions in more detail, presenting a case study on the monthly change in nonfarm payrolls (NFP), a particularly influential US economic statistic. We proceed as follows. Section 4.1 provides background on NFP. Section 4.2 discusses why hedgers and speculators trade short-dated derivatives on NFP. Section 4.3 argues that parimutuel derivatives auctions have a comparative advantage over bilateral matching for trading NFP derivatives. Section 4.4 describes the design, mathematics, and dynamics of parimutuel derivatives auctions on NFP.