Dear community,

I am new here, I just joined and I wanted to share something with you. I've been working on something that sits at an unusual intersection and I'm looking for honest pushback from people who understand market structure.

The concept: real-world uncertain events - things like delivery failure rates, machine downtime, warehouse incidents - are fully measurable in real time but have no financial instrument attached to them. I'm building a platform where these risks can be indexed and traded as contracts, structurally similar to futures but with operational uncertainty as the underlying.

My hypothesis is that this is a gap and that if you can index the risk reliably, you can build a market around it - both for hedgers who want to offload exposure and speculators who want to price it.

I've built a working prototype with a live index and contract mechanics. The obvious next step is finding bilateral interest - people on both sides willing to trade this.

Three things I genuinely don't know yet:

1. Would a speculator actually trade this - and what would make them trust a new index enough to take a position?
2. Is there a historical precedent for a derivatives market bootstrapped from scratch with no existing OTC market underneath it?
3. Who is/are the natural first trader(s) in practice - not in theory?

Happy to share the prototype with anyone curious. And I am genuinely looking for the hardest questions you can throw at this.

Greetings,
Marten
www.quantara-tech.me

It sounds like a reinsurance product; is it like a catastrophe risk bond?  there was a time when these had some interest; maybe they still do?

That's a fair comparison and a useful starting point. Cat bonds and ILS are probably the closest existing analogy - risk that's been securitized and made tradable outside traditional insurance structures.

The distinction I'd draw is on liquidity and accessibility. Cat bonds are typically large, illiquid, OTC instruments - institutional only, long holding periods, complex structuring. What I'm exploring is whether the same underlying logic - index a measurable risk, attach a financial instrument - can be made continuous and exchange-traded rather than episodic and bilateral.

The cat bond market also stayed mostly within natural catastrophe risk. The question I'm sitting with is whether operational risks - which are equally measurable but currently ignored by both insurance and capital markets - could follow a similar path but with a more liquid structure from the start.

So yes, spiritually similar. But the market structure I'm aiming for is closer to how weather derivatives evolved from cat bonds - more standardized, more accessible, more continuous.

Does the cat bond parallel make you more or less skeptical of the concept?

The world of insurance, actuaries etc. is a world on its own.  I briefly worked for a company that tried to popularise CAT Risk bonds in the late 90's.  The guy running the company was absolutely convinced they were the 'next big thing' and spent a fortune trying to get it off the ground.  National Australia Bank poured some money into it as well, but it never took off.  I suspect you'd need to get one of the big insurers interested.

That's a really useful data point - thank you for sharing it. The CAT bond parallel is instructive precisely because it shows how hard market creation actually is, even with institutional backing.

The lesson I take from stories like that is that the product wasn't the problem - distribution and timing were. CAT bonds eventually did take off, just later and differently than the early pioneers expected.

Your point about needing a big insurer is something I've heard consistently. The honest challenge is that getting there requires proof of concept first - which is the classic chicken and egg. The insurer wants to see a functioning market before committing, but the market can't function without institutional participation.

I'm curious - from your experience in the late 90s, what was the actual sticking point? Was it the insurers not seeing the value, or was it finding the speculative side willing to take the other side of the trade?