Outcome Risk
In prediction markets, outcome risk focuses on a single outcome rather than the overall event. It captures the chance that this particular outcome will not be the final resolved result.
Outcome risk is shaped by probability level, confidence, and market conditions. An outcome priced at 0.90 with weak liquidity may carry more risk than one priced at 0.70 with strong support. This risk changes over time. As information accumulates and markets converge, outcome risk often declines, but late-breaking news or disputes can increase it again.
Outcome risk is asymmetric. The risk profile of a “Yes” outcome is different from the corresponding “No” outcome, even within the same market.
For analysts, outcome risk adds precision to prediction markets data analysis. It allows risk to be assessed at the outcome level rather than treating all forecasts equally.
Why It Matters
Outcome risk helps users understand which outcomes are fragile despite appearing confident. It prevents overreliance on probabilities that are weakly supported.
What factors increase outcome risk in prediction markets?
Outcome risk increases with low liquidity, few active traders, and unstable prices. Ambiguous event definitions and unresolved disputes also raise risk. Outcomes that rely on late or unclear data sources tend to remain riskier for longer. These factors are visible in prediction markets data.
How is outcome risk different from prediction risk?
Prediction risk refers to uncertainty at the market or forecast level. Outcome risk focuses on a specific outcome within that market. An event can have low overall prediction risk while one outcome remains risky. This distinction is important for detailed analysis.
How do analysts assess outcome risk using prediction markets data?
Analysts assess outcome risk using probability levels, confidence indicators, forecast range, and liquidity signals. Outcomes with volatile prices and weak participation are treated as higher risk. Combining these signals improves risk-aware modeling. This approach goes beyond probability alone.
Real-World Example
On Polymarket, an outcome priced at 0.85 may still show high outcome risk if trading is thin and prices fluctuate sharply. Analysts treat such outcomes cautiously despite the high probability.
Outcome Risk and FinFeedAPI
FinFeedAPI’s Prediction Markets API provides prediction markets data needed to assess outcome risk at a granular level. Analysts can combine outcome-level probability prices with liquidity, volume, and stability indicators. This supports risk-aware forecasting, monitoring, and decision-making. The API enables consistent outcome risk analysis across prediction markets.