Prediction Market Probabilities
Interpret binary contract prices without treating them as certainty.
Build the mental model first.
A YES price resembles an implied probability, but liquidity, fees, risk preferences and market structure can separate it from a calibrated real-world forecast.
Interpret binary contract prices without treating them as certainty.
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.
Macro event monitoring and scenario weighting with explicit semantic caveats.
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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