Amazing post. But I am stuck at the “prediction market does not reflect probability” point. Currently Trump futures sell for 0.36$ and Metaculus predicts a 22% winning chance of Trump winning in 2024. This difference is what one would observe if many people are used these futures contracts for hedging. However, couldn’t I just issue lots of futures contracts to bring the price down? Assuming that my assets are not meaningfully linked to Trump winning, that means 0.36$-0.22$=0.12$ expected return per issued contract.
Amazing post. But I am stuck at the “prediction market does not reflect probability” point. Currently Trump futures sell for 0.36$ and Metaculus predicts a 22% winning chance of Trump winning in 2024. This difference is what one would observe if many people are used these futures contracts for hedging. However, couldn’t I just issue lots of futures contracts to bring the price down? Assuming that my assets are not meaningfully linked to Trump winning, that means 0.36$-0.22$=0.12$ expected return per issued contract.