What is resolution risk in prediction markets?
Resolution risk is the chance that a prediction market resolves in a disputed or unexpected way. This can happen when resolution criteria are ambiguous, the outcome is controversial, or external events create edge cases that the original market rules did not anticipate.
How does Merlin calculate resolution risk scores?
Merlin assigns risk scores (0–100) based on four factors: time to expiry (markets closer to expiry are riskier), odds closeness (50/50 markets are more contentious), trading volume (high-volume disputes affect more traders), and topic sensitivity (political and controversial topics score higher).
Why should I monitor resolution risk?
High resolution risk markets may resolve differently than expected, causing losses even if your prediction was "correct" by common interpretation. Monitoring risk scores helps you avoid markets with ambiguous outcomes or reduce position sizes in risky markets.