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Quantitative Finance · Glossary

What is Event contract, resolution source?

Also known as: event contract · resolution source

Definition 27.4 Markets III: Commodities, Energy and Crypto · Chapter 27 — Prediction and Betting Markets

An event contract is a derivative that pays a fixed amount, usually one dollar, if a specified event occurs and nothing otherwise; its price, as a share of the payout, reads as the market’s probability of the event. Its resolution source is the source and procedure named in the contract by which the occurrence of the event is determined.

An event contract on a blockchain venue: YES and NO tokens are minted together against one dollar, trade separately, and the winning token pays one dollar when the oracle resolves the event. Because a pair always redeems for one dollar, YES and NO prices sum to about one. Schematic.
Figure 27.1. An event contract on a blockchain venue: YES and NO tokens are minted together against one dollar, trade separately, and the winning token pays one dollar when the oracle resolves the event. Because a pair always redeems for one dollar, YES and NO prices sum to about one. Schematic.
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