Exploit Derivatives & National Security

31 Pages Posted: 2 May 2007 Last revised: 13 Mar 2008


Critical infrastructures remain vulnerable to cyber attack despite a raft of post-9/11 legislation focused on cyber security in critical infrastructures. An emerging discipline known as the economics of information security may provide a partial solution in the form of a hypothetical market that trades exploit derivatives, a modified futures contract tied to cyber security events. This paper argues that such a market could serve to predict and prevent cyber attacks through the operation of the efficient capital market hypothesis, but only after changes to the present regulatory environment. Specifically, I argue that a statutory safe harbor would allow the creation of a pilot market focused on vulnerabilities in Internet protocol version six, an emerging communications standard that China hopes to deploy throughout its national network before the 2008 Olympics. Indeed, such a safe harbor would align the interests of military and civilian policymakers on the common goal of protecting critical infrastructure from a computer network attack originating in China, whether instigating by the People's Liberation Army or so-called black-hat hackers.

Keywords: vulnerability trading, national security, critical infrastructure, welfare economics

Suggested Citation

Schwalb, Micah, Exploit Derivatives & National Security. Yale Journal of Law & Technology, Vol. 9, p. 162, 2007, Available at SSRN: https://ssrn.com/abstract=983838

Micah Schwalb (Contact Author)

Roenbaugh Schwalb ( email )

4450 Arapahoe Ave
Suite 100
Boulder, CO 80303
United States

HOME PAGE: http://www.rslfirm.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics