Saturday, July 18, 2009

Hedging against Job Loss

You can't hedge against the idiosyncratic risk of losing your job, but you can hedge against rising unemployment nationally. The North American Derivatives Exchange (, formerly offers options on the unemployment rate and other economic events. I did a quick search to see if any financial writer had suggested these options as part of a strategy to hedge against the risk of unemployment. So far, I haven't found any.

I'm curious also about whether the managers of staffing firms have used these options. A number of publicly-traded staffing firms had significant amounts of net cash on their balance sheets last year; did any of them use some of that net cash to hedge against an increase in the unemployment rate? If they did, they'd have even more cash now.


Mark Essel said...

Dave, such an intriguing concept you have shared. It has the feel of picking up large life insurance policies. But there's a rational component, certainly in the trend we are witnessing.

I'd comment more, but I'm terribly lazy when it comes to logging in. Disqus? These word verifications blow, and I don't get to share your post automatically on my aggregator streams.

DaveinHackensack said...


I'll add Disqus when I launch the new blogs (Steam Catapult and Shadow Stocks, which will replace The Hackensack), which should be fairly soon.