Forecasting & prediction-market glossary

Market-implied probability

The likelihood of an outcome as read off a market price. A contract that pays $1 on yes and trades at 63 cents implies roughly a 63% chance.

Calibration

How well probabilities match reality over many events. A well-calibrated source is one where, across everything it prices at 70%, close to 70% actually happen.

Resolution

The moment a market settles because the outcome is known. The winning contracts pay out and the losing ones expire worthless.

Resolution source

The agreed authority used to decide the outcome — an election board, an official statistic, a named report. Clear sources make clean markets; vague ones invite disputes.

Liquidity

How easily you can trade a contract without moving its price much. Deep liquidity means a probability is hard to nudge and therefore more trustworthy.

Volume

The total value traded in a market over a period, often 24 hours. High volume signals attention and usually a more reliable price.

Spread

The gap between the best buy price and the best sell price. A tight spread reflects a liquid, confident market; a wide one reflects uncertainty or thin trading.

Longshot bias

The tendency for very unlikely outcomes to trade slightly richer than their true odds, and heavy favourites slightly cheaper — a well-documented pattern to keep in mind at the extremes.

Base rate

How often something happens in general, before considering the specifics of this case. A sensible starting point that stops you over-reacting to a single vivid detail.

Brier score

A standard measure of forecast accuracy: the squared difference between the probability assigned and what actually happened. Lower is better, and it rewards being both confident and right.

Prior

Your estimate of a probability before seeing new evidence — often just the base rate. It is the belief you are about to update.

Posterior

Your updated estimate after incorporating new evidence. Moving cleanly from prior to posterior as facts arrive is the core of good forecasting.

Hedging

Taking an offsetting position to reduce risk. In markets this can mean buying the opposite side to lock in a result or protect against being wrong.

Arbitrage

Profiting from a price that is out of line with the evidence or with a related market. Arbitrage is the force that keeps prices honest by punishing mispricing.

Order book

The live list of outstanding buy and sell offers at each price. It shows where demand and supply sit and how much it would cost to move the market.

Market maker

A participant (often automated) that continuously quotes both buy and sell prices, providing liquidity so others can always trade. In exchange it earns the spread.

Neg-risk / multi-outcome market

A market with several mutually exclusive outcomes — such as a party nomination — where exactly one resolves yes. Read the outcomes as a field whose prices should sum to about 100%.

GEO (generative engine optimization)

Structuring content and data so that AI answer engines can find, understand and cite it accurately — the machine-readable cousin of traditional search optimization.

llms.txt

A plain-text file at a site's root that gives language models a concise, machine-first map of what the site covers and how to use its data — a discovery aid for AI agents.

Ready to see the terms in action? Browse live probabilities on the questions page, or start with the explainer What is a prediction market?