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Fill quality, the maker's profit equation, and the markout test move from a Polymarket CLOB to an FX or futures book unchanged. The payoff structure differs; adverse selection is adverse selection.
The CVaR-constrained portfolio QP that sizes Polymarket election arbs is the same machine that sizes a futures book. Different loss shapes, one tail metric, one fix for the correlation that spikes in a crisis.
Kelly's formula is identical in a prediction market and a prop challenge, but one optimizes long-run growth and the other a first-passage race to a target before an absorbing trapdoor. Opposite geometry, opposite sizes.
Polymarket could kill structural arbitrage but won't: coherent pricing means an NP-hard solve per trade. It chose speed, pays arbitrageurs roughly 20 percent of fees, and the edge regenerates on every trade forever.
Softmax is the Polymarket price formula. Work one trade to the cent, see why the maker's loss is capped, why the liquidity parameter b sets price impact, and why arbitrage distance is measured in KL, not Euclidean.
A single P&L number hides four systems and a lot of luck. Grade execution with eta, attribute profit by edge source, split regret into detection, computation, execution, and sizing, and you finally know whether it was skill, structure, or luck.
Let five agents touch the wallet and they overspend, stack correlated risk, and breach the tail budget. A single allocator funds proposals by one optimization, and hard risk governors override it to keep you solvent.
Wire your solver to your order router and one crash takes down both. Separate detection from execution behind a trade-proposal interface, stack three layers on three clocks, and let a fast scanner trigger the slow solver only where it pays.
Five state-election arbs feel diversified until a national shock sinks all five at once. Linear correlation hides that; tail dependence exposes it. Use a Student-t copula and size for the 25-to-1 day.
A structural arb that printed in October can be worthless by February with no change to the math. Regimes, the term structure of strategy, and crowding decide who actually gets paid, and usually it is not you.
Lead-lag edge lives in the big moves, so quantile-regress on the tail, not the mean. Then label the cause from trade size and the liquidation feed: impact follows clean, liquidations snap back, and scheduled news is a cue to widen quotes, not to trade.
The naive lead-lag trade enters B after A moves and exits on a timer. That wastes the edge. Use the slope as a forecast of B's move, exit the instant B hits it, and hold to the horizon only as a backstop.