Resolution Risk and Contract Wording
Every risk so far has been about being wrong about the world. This one is different: you can be right about the world and still lose, because the contract does not say what you assumed it said. Resolution risk is the largest non-market risk in event trading, and the discipline against it is unglamorous: read the rule, not the headline.
The rule is the contract
A market's title is marketing; its resolution criteria are the instrument. The criteria name a source (a specific statistical release, an official record, a named organisation's declaration), a deadline, and a procedure for edge cases. Between title and rule, real divergences appear constantly:
- "Inflation above this year": which release, headline or core, first print or revised, rounded how?
- "Candidate X wins": called by whom, and what happens to the market if the result is contested past the contract's deadline?
- "The bill passes by March 31": passes which chamber, in what form, by whose clock and time zone?
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