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When Certainty Is Not Worth It: Capital Lock-Up and Settlement Discounting in Prediction Markets
Announce Type: new Abstract: Collateralized prediction markets are contingent-claim markets in which economic uncertainty can disappear before winning claims become redeemable. This paper studies the pricing effect of that delay. When collateral remains locked until oracle settlement, a near-certain dollar is a delayed dollar, so prices embed a maturity-dependent settlement discount in addition to beliefs about outcomes.