Advanced Prediction Market Analysis
26 words you meet in prediction markets, each one explained plainly.
Arbitrage
Arbitrage is a strategy that seeks to exploit pricing inconsistencies between economically related positions in a way designed to reduce or elimina...
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...
Brier Score
The Brier Score is a method for measuring the accuracy of probabilistic forecasts by comparing predicted probabilities with actual binary outcomes....
Conditional Market
A conditional market is a prediction market whose outcome or interpretation depends on another specified event or condition.
Cross Market Analysis
Cross market analysis is the process of comparing multiple related prediction markets to understand whether their probabilities are logically and e...
Cross Market Arbitrage
Cross market arbitrage attempts to exploit a pricing difference between related prediction contracts or venues.
Cumulative Probability
Cumulative probability is the probability that an outcome falls at or below, or at or above, a specified threshold depending on how the event is de...
Event Dependency
Event dependency exists when the occurrence of one event changes the probability of another event.
Forecast Accuracy
Forecast accuracy describes how well predictions correspond with eventual outcomes over time.
Forecast Horizon
Forecast horizon is the amount of time between making a forecast and the event or deadline being forecast.
Forecast Track Record
A forecast track record is a historical record of probability estimates and their eventual outcomes.
Independent Events
Independent events are events where the occurrence of one does not change the probability of the other.
Joint Probability
Joint probability is the probability that two or more specified events occur together. It is often written conceptually as: P(A and B)
Market Consistency
Market consistency describes whether prices across a group of related prediction markets form a logically coherent set of probabilities.
Prediction Market Arbitrage
Prediction market arbitrage is the attempt to exploit inconsistent prices between prediction contracts whose economic outcomes are sufficiently rel...
Probability Bucket
A probability bucket groups forecasts with similar probability estimates so their performance can be evaluated together. For example: 50% to 59% 60...
Probability Consistency
Probability consistency describes whether probabilities across related outcomes obey the logical relationships implied by their definitions.
Probability Distribution
A probability distribution describes how probability is allocated across a range of possible outcomes.
Probability Sum
Probability sum is the combined probability assigned to a set of outcomes.
Probability Tree
A probability tree is a structured way of mapping possible sequences of events and the probabilities associated with each path.
Relative Mispricing
Relative mispricing occurs when the price of one prediction contract appears inconsistent with the price of another related contract.
Relative Value
Relative value is the attractiveness of one market or contract compared with another related market or contract.
Scenario Analysis
Scenario analysis evaluates several plausible future situations and considers how each would affect the probability of an outcome.
Sensitivity Analysis
Sensitivity analysis examines how much a probability estimate changes when important assumptions are changed.
Threshold Market
A threshold market is a prediction market asking whether a measurable value will be above, below, reach or otherwise satisfy a specified level acco...
Time to Resolution
Time to resolution is the remaining period before a prediction market is expected to reach its final outcome under its rules.