Adaptive Liquidity in Prediction Markets via Online Learning
...Simu-lations demonstrate that the mechanism adaptively shifts liquidity across regimes in response to both order flow and inventory dynamics. Our results establish a principled framework for adaptive liquidity, connecting prediction market design with online learning....
https://arxiv.org/pdf/2605.09599
Crowdedness, Mispricing, Crashes, and Spikes - efmaefm.org
...Crowdedness, Mispricing, Crashes, and Spikes Boulis Maher Ibrahim1 Heriot Watt University, Centre for Social and Economic Data Analytics (CSEDA)...
https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2025-Greece/papers/Crowdedness%2C%20Mispricing%2C%20Crashes%2C%20and%20Spikes.pdf
Settlement Manipulation in Prediction Markets - arXiv.org
...Abstract Prediction markets increasingly list contracts settling on an asset price that holders can move by trading the underlying. We build a model showing that such contracts transfer wealth from prediction-market liquidity traders to manipulators and harm price discovery in the underlying, even as it becomes more liquid. After the launch of Polymarket?s five-minute Bitcoin contract ......
https://arxiv.org/pdf/2606.31675
Liquidity and Prediction Market Efficiency - Columbia Business School
...I investigate the relationship between liquidity and market efficiency using data from short-horizon binary outcome securities listed on the TradeSports exchange. I find that liquidity does not reduce?and sometimes increases?deviations of prices from financial and sporting event outcomes. One explanation is that limit order traders are ......
https://business.columbia.edu/sites/default/files-efs/pubfiles/3098/Tetlock_SSRN_Liquidity_and_Efficiency.pdf
Crowdedness, mispricing, crashes, and spikes - ScienceDirect
...Under these conditions, the market can be nudged into a self-propagating liquidity state, or ?liquidity spiral,? requiring intervention or substantial price movements to restore equilibrium. Consequently, reflexive crowdedness can render order flow toxic, causing traders to unknowingly provide liquidity at loss....
https://www.sciencedirect.com/science/article/pii/S0378426625001050
Crowdedness, mispricing, crashes, and spikes - ScienceDirect
...The focus on liquidity costs makes this mispricing measure particularly relevant to liquidity traders and order flow toxicity compared to other measures calculated from total price change, such as price volatility and the Volume-Synchronised Probability of Informed Trading (VPIN) of Easley et al. (2011a, b)....
https://www.sciencedirect.com/science/article/abs/pii/S0378426625001050
Price Discovery and Trading in Modern Prediction Markets
...Moreover, net order imbalance from large trades strongly predicts subsequent returns, and the market experiencing greater directional order flow from large trades tends to lead price discovery. These results underscore how platform structure, liquidity, and informed trading interact to shape trading and prices....
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5331995
Deep Learning of the Order Flow for Modelling Price Formation
...The second work of the thesis further improves the price prediction capabil-ity of the deep order flow model. By introducing a novel architecture, the model is given the ability to produce probabilistic forecasts and jointly model the di-rection and size of price movements. Such probabilistic forecasts are a more realistic representation of uncertain risky markets, in addition to being neces ......
https://discovery.ucl.ac.uk/id/eprint/10142659/1/Lim_thesis.pdf
Liquidity Risk in Prediction Markets: A Polymarket Case Study
...ABSTRACT This paper investigates liquidity risk in prediction markets through a case study of Polymarket, focusing on two markets: the ?Jerome Powell out as Fed Chair in 2025? market and the ?U.S. tariff rate on China on August 15? market. Over a two-month period, yes and no share prices, bid-ask spreads, trading volumes, liquidity pool sizes, and volatility were analyzed using Python ......
https://www.camelliavc.com/wp-content/uploads/2025/08/Nicky-Polymarket-Paper.pdf
Unlocking Liquidity on Prediction Markets
...In this paper, we design and calibrate a shortfall pricing risk engine that enables solvent lending against collateralized prediction market positions. Prediction markets have experienced breakout success, yet locked capital and bounded returns leave sub-stantial value on the table....
https://docs.lattica.finance/unlocking-liquidity.pdf
An order flow model and a liquidity measure of financial markets
...The thesis seeks a better understanding of liquidity generation process of financial markets and attempts to find a quantitative measure of market liquidity. Various statistical modeling techniques are introduced to model order flow generation, which is a liquidity generation process of the market....
https://dspace.mit.edu/bitstream/handle/1721.1/45884/320433350.pdf
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