There sort of could be. One example could be big pharmaceutical company investors. If the pharmaceutical company is doing well, then it has probably developed drugs that will prolong the lifespan of Americans. Its success is correlated to longevity. If it is having trouble developing potent new drugs, however, then life expectancy will fail to rise. In that case, death derivatives could provide a good hedge for these firms' equity.

In general, any industry aimed at the elderly will be better off if people life longer. So these death derivatives could serve as a reasonable hedge for any investors who own shares in such firms.

New Sorts of Insider Trading Concerns

How might an insider tip work in the death derivatives market? Imagine that you're a medical researcher, and you just learned that there will be shortage of the flu vaccine. That likely means many elderly people's lives could be threatened. Suddenly, you can profit on having this information by purchasing death derivatives.

Of course, chances are that these derivatives will only be purchased by large, institutional investors. The Securities and Exchange Commission just has to make sure none of those investors have close relatives in the medical industry who might be privy to knowing this sort of information before the public does.

Is This Really So Morally Questionable?

Finally, there's the moral question. In a sense investors in death derivatives would cheer on the grim reaper's speedy arrival. Are death derivatives just plain wrong? Some people might say so, but there are a few reasons why they might not be so bad.

For starters, there are already industries that profit from death. Think about the casket industry. It will certainly slow down if a cure for cancer is suddenly found. We generally don't find it morally problematic that there's a death industry. But is that different from betting on someone's suffering for pure financial gain? The death industry, as it is today, provides some product or service to the deceased or their families. Death derivative investors would provide no such benefit, though they would potentially help more more pensions to survive.



Perhaps this does make death derivatives different, but the idea that investors could be benefiting through human suffering isn't entirely new. Take, for example, bets against the mortgage market by some investors towards the end of the housing bubble. These investors believed that home prices would decline and foreclosures would soar. Those outcomes aren't quite death, but they're certainly terrible for those homeowners. Of course, the same people who might find death derivatives morally repugnant might also find shorting housing market nearly as bad.

Of course, that might not stop Wall Street and investors from trying to make these securities work. If there is a market for death derivatives and they can find mechanisms that create a robust, liquid market, then it could thrive.





* Anyone interested in my idea who have access to capital to create something huge, feel free to e-mail me. Obviously, I won't share the details, as I don't want anyone to steal it, but I can provide some explanation of what it would entail for truly interested investors or bankers. It would be a multi-trillion dollar market that would create opportunities on both Wall Street and Main Street. It may, however, run into some moral objections, as I alluded to!

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