Binary Payoff
In prediction markets, a binary payoff means outcomes resolve in an all-or-nothing way. If the predicted outcome occurs, the position pays a fixed amount; if it does not, it pays zero.
This structure is common in simple event markets with clear resolution criteria. It makes payouts easy to understand and settlement straightforward. Binary payoffs create sharp incentives. Small changes in belief can lead to decisive trading behavior because near-miss predictions are not rewarded. They also affect probability dynamics. As resolution approaches, probabilities often converge quickly toward extremes because the payoff does not scale gradually.
For analysts, binary payoffs shape how prediction markets data behaves. Volatility, conviction, and late-stage price movements are often stronger under binary payout rules.
Why It Matters
Binary payoffs define risk and reward clearly. Understanding them helps users interpret probability swings and incentive-driven behavior in prediction markets.
What is a binary payoff in prediction markets?
In prediction markets, a binary payoff means an outcome pays a fixed amount if correct and zero if incorrect. There is no partial payout. This makes forecasting outcomes decisive rather than incremental. It is one of the simplest payoff structures.
How does a binary payoff affect prediction markets data?
Binary payoffs often lead to sharper probability movements in prediction markets data. Traders react strongly to new information because only full correctness is rewarded. This can increase volatility, especially near resolution. Analysts must account for this when interpreting late-stage signals.
Why is a binary payoff important for prediction markets APIs?
Prediction markets APIs expose data from markets with different payoff structures. Knowing a market uses a binary payoff helps analysts interpret probability sensitivity and trading behavior. It adds context for volatility and convergence patterns. APIs allow binary payoff effects to be analyzed across markets.
Real-World Example
On Polymarket, many event markets use a binary payoff. If the event occurs, “Yes” shares pay out fully, while “No” shares pay nothing, or vice versa.
Binary Payoff and FinFeedAPI
FinFeedAPI’s Prediction Markets API provides prediction markets data from binary payoff markets. Analysts can study how all-or-nothing payouts influence probability paths, confidence signals, and market behavior. This supports incentive analysis, forecasting research, and market design evaluation. The API enables consistent analysis of binary payoff dynamics across prediction markets.