Prediction Market Liquidity Open Interest and Volume
Separate trading activity, outstanding exposure and available book depth.
Build the mental model first.
Volume measures turnover, open interest measures outstanding exposure, and liquidity describes the ability to trade without moving price. They answer different questions.
Separate trading activity, outstanding exposure and available book depth.
Now make it exact.
Notation and units
Decimal rates and volatilities, year-fraction time and continuous compounding unless stated otherwise.
Every model has a price.
Educational conventions are stated explicitly and may simplify market quotation or settlement details.
Rates are continuously compounded unless the section says otherwise.
Inputs are deterministic in the base model.
“An unstated convention is a future reconciliation break.”— THEQUANTBATEMAN
Why a quant cares.
Screening active events, qualifying probability signals and comparing market quality.
The hedge has opinions.
Start with the quote convention, then ask which Foundations risk survives the hedge. A number without its convention is merely well-dressed ambiguity.
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