Death Arbitrage and Uber Battles

Death arbitrage.

We talked a while back about Donald F. "Jay" Lathen Jr., a former Lehman and Citigroup investment banker who was laid off in September 2008, kicked around for a while, and in 2009 "discovered survivor's option bonds." A survivor's option bond (or certificate of deposit) is a bond (or CD) that can be held by two people in a joint account, and if one of them dies, the bond can be redeemed immediately at par. Many of these bonds traded at a discount to par, and Lathen had the bright yet also undeniably dark idea of finding terminally ill people (in hospices and nursing homes), buying discounted survivor option bonds jointly with them, and then redeeming them at par when the people died. This worked quite well, and Lathen ended up setting up a hedge fund to run the strategy using investor money.