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Leveraged Prediction Markets: Theory and Design

Market Microstructure, Finality, Credit, and Protocol Engineering

Leveraged Prediction Markets: Theory and Design
This book is 100% completeLast updated on 2026-10-25
Maksym Nechepurenko

A rigorous framework for leveraged prediction markets: payoff geometry, microstructure, finality, credit, and protocol design, with empirical studies of Polymarket and Kalshi.

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About the Book

What changes when a prediction-market position is financed rather than fully paid for?

Leveraged Prediction Markets: Theory and Design develops a mathematical and engineering framework for answering that question. It treats leverage not as a multiplier added to a market price, but as a system of obligations that must remain explicit through trading, changing information, finality, repayment, and redemption.

Across nine parts and 42 chapters, the book moves from contingent payoff geometry and market microstructure to margin, liquidation, credit, and protocol design. It distinguishes event outcomes from oracle decisions, protocol finality, redeemable claims, and realised cash. It then examines physically backed leverage, debt-free finality under stated assumptions, credit pools, loss waterfalls, withdrawal queues, and asynchronous multi-leg contracts.

Empirical studies of Polymarket and Kalshi complement the formal analysis. Worked examples, definitions, proofs, algorithms, and diagrams connect economic mechanisms with implementation constraints. The final parts address provenance, reproducibility, protocol composition, recovery, and the evidence required to verify a financial state transition.

Written for researchers, quantitative analysts, market designers, risk professionals, and protocol engineers, the book assumes familiarity with probability, basic financial accounting, and market microstructure. Some sections also use convex analysis and smart-contract concepts. It is a research monograph, not an introduction to betting or a promise of trading returns.

This is the complete First Edition (2026), supplied as a 648-page, full-colour PDF with searchable text, vector figures, bookmarks, and clickable internal references.

Companion materials, corrections, and release information are linked from book.axient.app and github.com/AxientLab. Availability and licensing are specified with each release.

Complimentary copies for students, reviewers, researchers, and academic partners are available on request: maksym@devnull.ae.

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Author

About the Author

Maksym Nechepurenko

Maksym Nechepurenko is an independent researcher and AI and data science leader based in Dubai. He leads research at ForesightFlow (Devnull FZCO, UAE), focusing on prediction markets, market microstructure, event-linked derivatives, and financial-protocol design. With more than 18 years of experience in production systems, financial risk, and blockchain analytics, he connects formal models with empirical evidence and implementation constraints. He is the author of Leveraged Prediction Markets: Theory and Design and AI Agents at the Border.

Contents

Table of Contents

Front matter
  • Preface
  • Evidence and Observation Legend
  • Mathematical Conventions
  • Abbreviations
  • Architecture at a Glance
  • Contents
  • List of Figures
  • List of Tables
I Mathematical Foundations of Prediction Markets
  • 1. Event Claims, State Spaces, and Payoff Geometry
  • 2. Coherent Prices, Complete Sets, and No-Arbitrage Geometry
  • 3. Trading Mechanisms and Executable Prices
  • 4. Rules, Evidence, Clocks, and Finality Layers
II Market Microstructure of Leveraged Prediction Markets
  • 5. Why Conventional Perpetual Mechanics Do Not Port
  • 6. Resolution-Aware Controls as an Experimental Architecture
  • 7. Mechanical Stress Tests on Observed Polymarket Paths
  • 8. Variant Taxonomy Beyond One Binary Market
  • 9. Manipulation, Informed Trading, and Regulatory Architecture
  • 10. Fill-Side Behavior and the Limits of Role Identification
III Finality Architecture: Oracle, Protocol, and Venue Design
  • 11. Oracle Adjudication as an Event-Sourced State Machine
  • 12. Semantic Governance, Rules, and Clarifications
  • 13. Protocol Finality in Conditional Tokens
  • 14. Redemption, Censoring, and Entitlement Boundaries
  • 15. State-Triggered Margin and Conditional-Token Conversion
  • 16. Outcome Determination and Finalization on Kalshi
  • 17. Functional Comparison of Polymarket and Kalshi
  • 18. Multi-Leg Instruments under Asynchronous Finality
IV Physically Backed Leverage and Debt-Free Finality
  • 19. Financed Outcome Claims and Maturity Separation
  • 20. Robust Hard-Flat and Debt-Free Finality
  • 21. Execution Uncertainty, Exact Leverage, and Shared-Book Capacity
  • 22. Failure Boundaries, Reserves, and Architecture Limits
V Credit Architecture and Loss Allocation
  • 23. On-Chain Credit Pools and Debt-First Accounting
  • 24. Backstops, Commitments, and Deterministic Loss Waterfalls
  • 25. Withdrawal Queues, Endogenous Capital, and Contagion
VI Calibration, Verification, and Reproducibility
  • 26. Empirical Operating Regions and Leverage Eligibility
  • 27. Calibration, Uncertainty, and Decision Rules
  • 28. Venue Emulator Methodology and Technical-Pilot Evidence
  • 29. AVET: Provenance-Aware Trace Datasets
  • 30. AEMB: Deterministic Cross-Language Conformance
VII Protocol Engineering and Deployment Boundaries
  • 31. Synthetic versus Physically Backed Architectures
  • 32. Reproducibility, Dataset Publication, and Privacy Boundaries
  • 33. Deployment Boundaries, Security, and Open Problems
VIII Applications and Venue Case Studies
  • 34. Forecasting and Decision Support: When Markets Help and Fail
  • 35. Hedging, Relative Value, and Real-World Risk Transfer
  • 36. Polymarket Venue Case Study
  • 37. Kalshi Venue Case Study
  • 38. Axient Reference Design and Worked Scenarios
IX Implementation Architecture and Assurance
  • 39. Canonical Protocol Graph and Financial State Authority
  • 40. Atomic Composition, Durable Sagas, and Exactly-Once Recovery
  • 41. Manifest-Bound Evidence and Claim Promotion
  • 42. Canonical E2E Conformance and FIA Worked Cases
Appendices
  • A. Frozen Notation, Clocks, and Local Symbol Reuse
  • B. Canonical Definition Ownership
  • C. Assumptions, Evidence Classes, and Observation Grades
  • D. Oracle Reconstruction Dictionary, Estimands, and Proof Details
  • E. Research Programme and Scientific Lineage
  • F. Theorem-Family Ownership and Proof Dependencies
  • G. Reproducibility Registry and Published-Claim Index
  • H. Financial Interaction Assertion Registry and Evidence Scope
  • I. Data, Software, and Repository Authority
References

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