A parimutuel market microstructure for contingent claims trading is proposed and analyzed. A parimutuel microstructure is a call auction where relative equilibrium prices of contingent claims are endogenously determined using a specific mechanism. We propose a market microstructure incorporating...

Financial intermediaries typically offer derivatives to their customers only when they can hedge the exposures from these transactions. Baron and Lange show that parimutuel auctions can be used by financial intermediaries to offer derivatives without exposing themselves to risk

"Parimutuel principles are widely used as an alternative to fixed odds gambling in which a bookmaker acts as a dealer by quoting fixed rates of return on specified wagers. A parimutuel game is conducted as a call auction in which odds are allowed to fluctuate during the betting period until the...