Prediction Arbitrage Calculator | Polymarket vs Kalshi
How do you calculate prediction market arbitrage and Dutch book spreads across Polymarket and Kalshi?
Prediction market arbitrage occurs when two distinct forecasting exchanges price identical contract outcomes with divergent implied probabilities exceeding trading friction fees. In binary event contracts—such as macroeconomic Federal Reserve policy decisions or electoral outcomes across Polymarket and Kalshi—traders exploit pricing inefficiencies through two primary mechanisms: cross-platform spread trades and Dutch book risk-free packaging. When the aggregate implied cost to cover all mutually exclusive outcomes totals less than 100% minus exchange taker fees, a mathematical arbitrage exists. Gemral Edge computes net spread differentials, implied probability divergence, and capital weighting models in real time to highlight non-directional trading opportunities without directional market bias.
Understanding Dutch book spreads and execution mechanics
Dutch book arbitrage involves constructing a portfolio of event contracts across all possible mutually exclusive outcomes such that the cumulative payout guaranteed at settlement exceeds the total capital invested, regardless of the real-world outcome. For example, buying "Yes" on Platform A and "No" on Platform B when the sum of their prices is under 100 cents locks in a fixed return upon market resolution. Gemral Edge calculates net return on investment (ROI) and optimal capital allocation using sizing algorithms to account for platform transaction fees, settlement timing, and counterparty risks. By tracking order book depth and settlement criteria discrepancies, quantitative market participants identify mispriced event contracts without directional exposure, establishing delta-neutral positioning across regulated and decentralized event exchanges.
How to use the calculator
Adjust the probability sliders for Polymarket and Kalshi or choose preconfigured contract spreads. The calculator instantly evaluates the net spread, expected payoff distribution, and required capital weighting. Dynamic URL query parameters enable instantaneous sharing of exact scenario calculations, while one-click iframe embedding allows financial researchers and publishers to embed live calculation widgets seamlessly.
Data sources and risk considerations
All pricing telemetry is ingested via public Central Limit Order Book (CLOB) APIs with 120-second freshness updates. Disclosed figures reflect public limit order quotes rather than guaranteed execution fills. Slippage, exchange withdrawal fees, and contract settlement rule variances must be evaluated independently. This tool is provided strictly for academic research and market transparency, not investment or wagering advice.
Frequently asked questions
How does prediction market arbitrage work between Polymarket and Kalshi?
Prediction market arbitrage exploits price discrepancies between decentralized and regulated event contract platforms. When two independent exchanges price identical binary outcomes such as macroeconomic interest rate decisions or electoral results with divergent implied probabilities, traders calculate the combined cost to purchase offsetting positions. If the sum of the implied probabilities across mutually exclusive outcomes is less than one dollar minus exchange trading fees, a mathematical arbitrage or Dutch book opportunity exists. Gemral Edge computes net spreads, implied probability divergence, and capital weighting models in real time to highlight non-directional trading opportunities without market bias.
What is Dutch book risk-free packaging in binary event contracts?
Dutch book arbitrage involves constructing a portfolio of event contracts across all possible mutually exclusive outcomes such that the cumulative payout guaranteed at settlement exceeds the total capital invested, regardless of the real-world outcome. For example, buying 'Yes' on Platform A and 'No' on Platform B when the sum of their prices is under 100 cents locks in a fixed return upon market resolution. Gemral Edge calculates net ROI and optimal capital allocation using sizing algorithms to account for platform transaction fees, settlement timing, and counterparty risks.
Is the prediction arbitrage calculator free and how is order book data sourced?
Yes. The Prediction Arbitrage Calculator is completely free to use and does not require registration. Order book data is continuously ingested via public Central Limit Order Book (CLOB) APIs from Polymarket and Kalshi. Market quotes are refreshed on a 120-second telemetry cycle with verifiable timestamp provenance. This tool is designed strictly for quantitative research, academic analysis, and market efficiency monitoring, and does not constitute financial or wagering advice.