Prediction markets.
A prediction market lets people trade contracts on whether a future event will happen. The price of each contract can be read as the market’s estimate of how likely that event is.
What prediction markets are
Prediction markets have grown from university research projects into regulated exchanges and global platforms. Some now run on public blockchains, which links them to the digital asset markets.
The contracts
Contracts on events
Each contract pays a fixed amount if an event happens and nothing if it does not. Events range from elections and central bank decisions to economic releases and sport.
The prices
Prices as probabilities
A contract that pays one dollar and trades at 70 cents implies a 70 percent chance of the event. As news arrives, the price moves to reflect it.
The outcome
Settled by the result
When the event is decided, most contracts settle at their full value or at zero, under rules published before trading begins.
Why we operate in prediction markets
Prediction markets combine young, often inaccurate pricing with outcomes that have little to do with most other investments.
Inefficient
Prices that drift
With few active traders in many markets, prices can sit away from the evidence for long stretches and new information can take time to show.
Different
Driven by events
Many outcomes, from elections to sport, have little to do with the direction of financial markets, so strategies built on them can behave differently from the rest of a portfolio.
Growing
Regulated and expanding
Regulated exchanges and new platforms have opened in recent years, and the range of events people can trade continues to widen.
Our purpose
Making the odds more reliable
A prediction market is useful because its prices can be read as odds, and those odds are now quoted in news coverage of elections, policy and the economy. The signal is only as good as the market behind it.
We build systematic strategies to find mispriced odds and trade them. When a price moves toward the evidence, everyone who reads it gets a better estimate of what is likely to happen. Prediction markets are a newer part of our work, and we hold that work to the same research standard as everything else we do.
Speak to the team.
Write to us to arrange an introductory call.