Estimation Error
Estimation error is the difference between a probability estimate and the underlying probability it is attempting to represent. Because the true probability of a unique future event is generally not directly observable beforehand, traders need to account for uncertainty in their estimates.
Why it matters to you
A trader might estimate: 65% while believing a reasonable range is: 55% to 72% If the market is at 62%, the apparent three percentage point edge may be too small relative to the uncertainty surrounding the estimate.
Terms that sit next to this one
See the prediction markets front
Live odds, what settles this week and five tools.