Prediction Market Resolution and Negative Risk
Connect settlement rules, oracle resolution and linked mutually exclusive markets.
Build the mental model first.
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.
Connect settlement rules, oracle resolution and linked mutually exclusive markets.
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.
Resolution-risk review, event aggregation and correct interpretation of multi-outcome structures.
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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