Prediction Markets Alpha
An autonomous multi-strategy trading system designed to exploit inefficiencies in prediction markets through AI-powered probability estimation and cross-market arbitrage. The platform combines Claude AI probability models with real-time spot price data to identify systematic mispricings across diverse market categories.
5
Strategies
Event-Driven
Architecture
Kelly
Risk Model
24/7
Execution
Key Differentiators
- AI-powered probability edge detection with calibrated confidence scoring
- Multi-strategy engine with 5 concurrent alpha generation approaches
- Cross-market arbitrage leveraging real-time spot price feeds
- Production-grade risk management with Kelly Criterion position sizing
The Problem
Prediction markets are systematically mispriced due to information asymmetry, retail investor emotional bias, and capital fragmentation. Only 0.51% of active wallets generate significant profit, suggesting massive inefficiency available to systematic approaches. Most participants lack the tools to process markets at scale, estimate true probabilities rigorously, or manage risk across a diversified portfolio of predictions.
AI Probability Engine
The platform integrates advanced AI models directly into the trading loop for real-time probability estimation. The system compares AI-derived true probability estimates against market-implied prices, executing trades only when the detected edge exceeds calibrated thresholds. Edge sources include sentiment divergence, stale pricing in low-liquidity markets, misunderstood resolution criteria, and quantifiable external data feeds.
Multi-Strategy Architecture
The system runs 5 concurrent alpha generation strategies: AI-powered probability edge detection, sum-to-one micro-arbitrage exploiting pricing inefficiencies, high-probability bond strategies capturing guaranteed returns on near-certain outcomes, cross-market spike detection leveraging real-time spot price feeds, and short-term directional prediction on high-frequency markets. Each strategy operates with independent capital allocation and risk parameters.
Cross-Market Arbitrage
A unique capability is the integration of real-time spot market data to identify mispricings in derivative prediction markets. When sudden price movements occur in underlying assets, the system detects corresponding prediction markets that have not yet adjusted, executing directional trades before the market corrects. This cross-market edge is particularly powerful in cryptocurrency prediction markets.
Risk Framework
The platform implements fractional Kelly Criterion position sizing (quarter-Kelly for conservative capital preservation), a 5-point validation pipeline before every order execution, aggressive portfolio monitoring with automatic de-risking triggers, and crash-recovery via periodic state snapshots. The architecture follows safety-critical design principles with fixed loop bounds, immutable configuration, and comprehensive assertion checking.
Execution & Monitoring
The system operates 24/7 with autonomous monitoring capabilities, executing trades on decentralized order books with real-time status dashboards. An append-only trade journal maintains a complete audit trail in structured format. The platform supports both paper trading (for strategy validation) and live execution modes, with mandatory validation periods before capital deployment.
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