HN user
Founder at Quantcha. Currently focused on the future of options, prediction markets, and what's next in investing.
The long horizon ones are also interesting on Polymarket because the vast majority don't have APY. As a result, prices should be discounted, but sum-to-1 doesn't allow for it. I'd expect a negative skew to the performance of traders willing to take those inflated prices (relative to what the odds DCF imply they should be). But there's also no upside for makers, so liquidity is pretty thin.
Great paper. Still digesting after a first pass, but it looks really solid.
Quick question: did your team consider the implications of capital recycling on the maker side? Liquidity providers tend to have superior tech and information, so the general edge is expected. However, the ability to effectively reuse the same capital to sell outcome sets seems like it could offer a scale advantage that enables them to capture even more opportunity. On the other side, takers expressing directional views have their capital committed to one position at a time. Do you think this contributes to the gains being so concentrated among them?