Arbitrage Risk
Arbitrage risk is the possibility that a trade believed to lock in a pricing discrepancy fails to behave as expected because the positions are not perfectly equivalent or cannot be executed and settled as assumed.
Why it matters to you
An apparent prediction market arbitrage may be affected by: slippage, insufficient liquidity, different resolution rules, execution delays, fees, settlement differences, platform failure, or contract mismatch. A price difference is not automatically free money.
Terms that sit next to this one
Execution Risk, Resolution Risk
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