Glossary
Common terms used in prediction markets and our accuracy reporting.
B
Brier Score
A scoring metric that measures the accuracy of probabilistic predictions. Calculated as (prediction - outcome)². Ranges from 0 (perfect) to 1 (always wrong), with 0.25 representing random guessing.
Example: If a market predicts 70% Yes and the outcome is Yes, the Brier Score is (0.70 - 1)² = 0.09
C
Calibration
A measure of how well predicted probabilities match actual observed frequencies. A well-calibrated forecaster has their 70% predictions come true about 70% of the time.
H
Hit Rate
The percentage of predictions where the forecasted outcome (>50% probability) matched the actual result. A simple directional accuracy measure.
Example: If 8 out of 10 markets predicted correctly, the hit rate is 80%.
Horizon
The time period before market resolution at which we measure the prediction. Common horizons are 30 days, 14 days, 7 days, 1 day, and 12 hours before close.
K
Kalshi
A CFTC-regulated prediction market exchange based in the United States. Allows US residents to legally trade on event outcomes through cleared, regulated contracts.
L
Liquidity
The amount of capital available for trading in a market. Higher liquidity means traders can buy or sell larger positions without significantly moving the price.
Example: A market with $100K in liquidity can absorb larger trades than one with $1K.
O
Outcome Contract
A tradeable contract that pays out a fixed amount (typically $1) if a specific outcome occurs, and nothing if it doesn't. The contract price reflects the market's probability estimate.
P
Polymarket
A decentralized prediction market platform built on the Polygon blockchain. Allows trading on real-world events with outcome shares settling at $0 or $1.
Prediction Market
A market where participants trade contracts whose payoff depends on the outcome of future events. Market prices aggregate information and produce probability estimates.
R
Resolution
The process of determining the official outcome of a market after the event occurs. Upon resolution, winning contracts pay out and losing contracts become worthless.
V
Volume
The total dollar value of contracts traded in a market over its lifetime. Higher volume indicates more trader interest and potentially more accurate prices.
Example: A market with $500K volume has seen half a million dollars worth of trades.