{"id":233475,"date":"2025-10-27T16:45:00","date_gmt":"2025-10-27T20:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=233475"},"modified":"2025-10-28T14:07:30","modified_gmt":"2025-10-28T18:07:30","slug":"hurricane-prediction-market-update-10-27-2025","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/hurricane-prediction-market-update-10-27-2025\/","title":{"rendered":"Hurricane Prediction Market Update [10\/27\/2025]"},"content":{"rendered":"\n

<\/p>\n\n\n\n

Let\u2019s look at the current ForecastEx hurricane prediction markets<\/a> in the context of Category 5 Hurricane Melissa<\/a> currently in the Caribbean. <\/p>\n\n\n\n

<\/p>\n\n\n\n

Below are the range of forecasted paths of Melissa (with strength indicated) from three distinct sources that use different methods. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

From ESRI Disaster Response Program<\/a>, displaying projections from the US National Hurricane Center. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

From Google DeepMind<\/a>. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

From Reask<\/a>.<\/p>\n\n\n\n

<\/p>\n\n\n\n

As you can see, there is a strong consensus on the storm’s path, and forecasted strength shows pretty good consistency as well. <\/p>\n\n\n\n

<\/p>\n\n\n\n

Hurricane Melissa is likely to make landfall in three countries in the span of a little more than a day. <\/p>\n\n\n\n

<\/p>\n\n\n\n

Jamaica<\/h1>\n\n\n\n

First, Hurricane Melissa will cause widespread catastrophic impacts for Jamaica. It is expected to make landfall at around 7:00 am ET (11:00 UTC) on the morning of Tuesday, October 28th.<\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
\"\"<\/figure>\n\n\n\n

From Google DeepMind<\/a>. <\/p>\n\n\n\n

<\/p>\n\n\n\n

According to the Google DeepMind ensemble, there is about a 96% chance of landfall as a major hurricane (Category 3 or greater), with the most likely category being Category 4. <\/p>\n\n\n\n

<\/p>\n\n\n\n

ForecastEx hosts contracts for countries in the Atlantic basin with the five highest historical probabilities of hurricane landfall, and Jamaica narrowly missed the cut, so there is no ForecastEx prediction market for Jamaica.<\/p>\n\n\n\n

<\/p>\n\n\n\n

The mountainous terrain of Jamaica will weaken Hurricane Melissa to some extent, but Cuba will then be threatened next. <\/p>\n\n\n\n

<\/p>\n\n\n\n

Cuba<\/h1>\n\n\n\n

<\/p>\n\n\n\n

Hurricane Melissa is expected to make landfall in Cuba about 12 hours later at around 7:00 pm ET (23:00 UTC) on the evening of Tuesday, October 28th. At the time of landfall, Google DeepMind\u2019s ensemble has Mellisa at about a 90% chance of being a major hurricane (Category 3 or greater).<\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
\"\"<\/figure>\n\n\n\n

From Google DeepMind<\/a>. <\/p>\n\n\n\n

<\/p>\n\n\n\n

ForecastEx has a market for \u201cWill there be a major hurricane landfall within 50 miles of Cuba in 2025?<\/a>\u201d which currently stands at around 75% for YES. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

From IBKR Forecast Trader<\/a>.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Comparing Google DeepMind’s odds to the market’s odds suggests the market is currently underpricing the YES value (and overpricing the NO value) for a Major Hurricane Landfall in Cuba in 2025 (which would also include the remaining chance of future hurricanes this year).<\/p>\n\n\n\n

<\/p>\n\n\n\n

The Bahamas<\/h1>\n\n\n\n

<\/p>\n\n\n\n

Next, Hurricane Melissa will impact The Bahamas. It is expected to traverse the islands at around 11:00 am ET (15:00 UTC) on Wednesday, October 29th. Around that time, Google DeepMind\u2019s ensemble has Mellisa at about a 50% chance of being a major hurricane (Category 3 or greater).<\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
\"\"<\/figure>\n\n\n\n

From Google DeepMind<\/a>. <\/p>\n\n\n\n

<\/p>\n\n\n\n

ForecastEx has a market for \u201cWill there be a major hurricane landfall within 50 miles of The Bahamas in 2025?<\/a>\u201d which currently stands at around 35% for YES. <\/p>\n\n\n\n

<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

From IBKR Forecast Trader<\/a>.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Importantly, for the contract to resolve to yes, the eye of the hurricane has to pass over the coastline of an island. So if the eye splits two islands and remains at sea, it will not have officially made landfall and therefore will not trigger the contract. This caveat notwithstanding, comparing Google DeepMind’s odds to the market’s odds suggests the market is currently underpricing the YES value (and overpricing the NO value) for a Major Hurricane Landfall in the Bahamas in 2025 (which would also include the remaining chance of future hurricanes this year).<\/p>\n\n\n\n

<\/p>\n\n\n\n

Atlantic Season<\/h1>\n\n\n\n

<\/p>\n\n\n\n

Hurricane Mellisa is the 5th hurricane of the 2025 Atlantic Hurricane season. <\/p>\n\n\n\n

<\/p>\n\n\n\n

ForecastEx has another market for the total 2025 Atlantic Hurricane Count<\/a>.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Below is a comparison of the current market odds with a simple calculation I explained in previous posts<\/a>. 
<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

From NOAA HURDAT2 Data<\/a> processed and plotted in Matlab. 
<\/p>\n\n\n\n

This simple calculation indicates that the market is overvaluing the YES odds (and undervaluing the NO odds) for the higher hurricane counts of at least 8, 10, 12, or 14. <\/p>\n\n\n\n

<\/p>\n\n\n\n

Further Reading<\/h1>\n\n\n\n