Arbitrage Structures
The cleanest edges in event markets come not from forecasting but from accounting: prices that must obey an identity and momentarily do not. This lesson covers the three structures a desk checks continuously, and the frictions that decide whether a violation is a trade.
The field must sum to one
Take a market with mutually exclusive, exhaustive outcomes, exactly one candidate wins. One outcome pays $1; therefore the fair prices of all outcomes sum to exactly $1, and any deviation is mechanically tradable:
- Asks summing below $1: buy the whole field, pay less than $1, collect exactly $1 at resolution.
- Bids summing above $1: sell the whole field, collect more than $1, pay out exactly $1.
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