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Foundationsfront-officemarket-note

Prediction Market Resolution and Negative Risk

Connect settlement rules, oracle resolution and linked mutually exclusive markets.

Reviewed 2026-08-10TheQuantBateman ResearchReading note
01Intuition

Begin with the executable market object.

A contract is only as precise as its resolution rule. Negative-risk events link multiple mutually exclusive binary markets, so a single YES/NO label does not describe the full event.

ONE-LINE DEFINITION

Connect settlement rules, oracle resolution and linked mutually exclusive markets.

02Mathematics

Make the quote arithmetic explicit.

∑ipi≈1 only under exhaustive, exclusive outcomes and market frictions\sum_i p_i \approx 1 \text{ only under exhaustive, exclusive outcomes and market frictions}
Notation and units

Decimal rates and volatilities, year-fraction time and continuous compounding unless stated otherwise.

03Assumptions

Record venue, timestamp, and convention.

01

The venue, timestamp, executable side and data status are part of every market observation.

02

Midpoints and derived probabilities are analytical coordinates, not guaranteed executable levels.

03

Licensing, freshness and resolution rules determine how the observation may be used.

“An unstated convention is a future reconciliation break.”— THEQUANTBATEMAN
04Market use

Distinguish observation from inference.

Resolution-risk review, event aggregation and correct interpretation of multi-outcome structures.

Intuition→Mathematics→Implementation→Desk risk
05Desk view
FRONT OFFICE VIEW

Ask what can actually be traded or hedged.

Start from the executable side and timestamp. Derived Foundations signals are only as reliable as the market state and resolution convention beneath them.

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06Related

Inspect the connected market state.