Prediction Markets Trading

Prediction markets have moved from curiosity to a product that regulated exchanges list, quant firms make markets in, and interviews increasingly touch. An event contract is the simplest derivative there is, a claim that pays $1 if something happens and $0 if it does not, and that simplicity is deceptive: the price is a probability, the payoff is bounded, there is usually nothing to hedge with, and the person trading against you may simply know more than you do.

This course teaches the mechanics and the trading, and it stays deliberately evergreen: what an event contract is and how the exchanges are organised, how to think in probability space and price against fees, how Bayesian updating and the favourite-longshot bias shape where the edge lives, how a market maker quotes a binary and survives informed flow, which arbitrage structures actually lock a profit, and how resolution rules, collateral and sizing decide whether a good model makes money. The first section is free.

The course pairs with two practice surfaces built on the same material: the Prediction Markets Trainer, a timed nine-screen case over everything taught here, and the Event Contracts Game, which scores your quoting and calibration against simulated informed flow. For the career layer, which firms run these desks, what the roles pay and how the interviews go, read the companion guide Prediction Markets Trading at Quant Firms. The probability underneath is covered in more depth in Basics of Quantitative Finance, and the market-structure vocabulary in Introduction to Markets, Trading and Risk.