ParlayMarket: Automated Market Making for Parlay-style Joint Contracts
Ranvir Rana, Viraj Nadkarni, Niusha Moshrefi, Pramod Viswanath

TL;DR
ParlayMarket introduces an automated market-making system supporting joint contracts, enabling efficient pricing and liquidity for complex, correlated bets in prediction markets, with proven convergence and empirical validation.
Contribution
This paper presents the first automated market maker supporting parlay-style joint contracts, improving pricing coherence and liquidity for correlated outcomes in prediction markets.
Findings
System converges to a fixed point approximating true joint distribution.
Pricing and monetary loss scale quadratically with the number of base markets.
Empirical results demonstrate effective scaling and realistic market performance.
Abstract
Prediction markets are powerful mechanisms for information aggregation, but existing designs are optimized for single-event contracts. In practice, traders frequently express beliefs about joint outcomes - through parlays in sports, conditional forecasts across related events, or scenario bets in financial markets. Current platforms either prohibit such trades or rely on ad hoc mechanisms that ignore correlation structure, resulting in inefficient prices and fragmented liquidity. We introduce ParlayMarket, the first automated market-making design that supports parlay-style joint contracts within a unified liquidity pool while maintaining coherent pricing across base markets and their combinations. Our main result is a convergence characterization of the resulting system. Under repeated trading, the AMM dynamics converge to a unique fixed point corresponding to the best approximation to…
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Taxonomy
TopicsSports Analytics and Performance · Forecasting Techniques and Applications · Auction Theory and Applications
