Prediction Markets
Prices as probabilities, favorite-longshot bias, fees, resolution rules, calibration and venue arbitrage.
Prediction Market Prices as Probability Estimators: Theory and Breakdown Points
A prediction market price on a binary outcome should, under efficient markets and risk neutrality, equal the true probability of that outcome occurring [1]. However, the price-to-probability mapping
Combinatorial and Conditional Markets: Pricing Events That Depend on Other Events
Combinatorial and conditional markets price bets on outcomes that logically or causally depend on other outcomes, using conjunction, disjunction, or conditional logic to create complex payoff structures. These
Why Prediction Market Prices Move Before News Breaks
Prediction markets frequently exhibit price movements that precede public news announcements by hours or days, driven by uneven information distribution among traders with varying access to pre-release signals.
The Favorite-Longshot Bias: Decades of Evidence from Betting Markets
**Abstract** The favorite-longshot bias describes a systematic deviation in betting markets where odds imply that longshots are underpriced and favorites are overpriced relative to their actual probability of
Combinatorial and Conditional Markets: Pricing Dependent Events
Combinatorial and conditional markets allow traders to bet on outcomes that depend on other events: not just "Will Biden win?" but "Will Biden win AND unemployment fall below
Liquidity in Prediction Markets: Depth, Spreads, and Why Small Markets Are Hard to Trade
Liquidity in prediction markets reflects the volume and tightness of available buy and sell orders at any given price level—measured by order book depth and bid-ask spreads. Small