North Korea Contract Bombs





Most of TS contracts are intuitive, and relatively easy to understand. The types of contracts that can get cloudy are the Current Events contracts (some popular current ones right now include bird flu in the US and an Iran airstrike). But these are also the type of contracts a reinsurance player would love to use to hedge, if the trading liquidity ever got to sufficient levels.

One notable controversy has been brewing ever since the first North Korean missile test. The contract states

The contract(s) will expire at 100 if (including but not limited to): North Korea launch a test missile and it leaves North Korean air space on/before 11:59:59pm ET on 31st July 2006

The contract(s) will expire at 0 if (including but not limited to): There is no such launch by the time/date specified in the contract or if there is a launch but it is confined to North Korean air space.

For the purpose of the contract, North Korean airspace is defined as the controlled and uncontrolled airspace over the North Korean territory and territorial waters.
For expiry purposes, the source used to confirm a test missile being launched and leaving North Korean airspace will be the US Department of Defence.

It is generally accepted now that a missile did leave NK airspace. However, the DoD has not clearly confirmed it. And the contract ran up from July 4 through 7, only to retrace back down in the following week. In hindsight, tying this contract to the explicit confirmation by the DoD was not the best idea. Hey, stuff happens.

But some of my acquaintances have an interest in the contract, and tensions have been running high. For the record, I do not have a position on the contract, nor have I ever transacted any of this contract.

UPDATE: TS has posted this update in the Forum (via Ace_Rothstein, in the pit).

I invite comments on the situation.