Negative Risk Markets

Negative risk is a mechanism for multi-outcome events where only one outcome can win. It enables capital-efficient trading by allowing positions across all outcomes within an event to be related through a conversion operation.

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How It Works

In a standard multi-outcome event, each market is independent. If you want to bet against one outcome, you must buy that outcome’s No positions—but those No positions have no relationship to the other outcomes. Negative risk changes this. In a neg risk event:

• A No share in any market can be converted into 1 Yes share in every other market

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Example

Consider an event: “Who will win the 2024 Presidential Election?” with three outcomes: With negative risk, that 1 No on “Other” can be converted into: This is capital-efficient because betting against one outcome is economically equivalent to betting for all other outcomes.

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Contract Addresses

Neg risk markets use different contracts than standard markets: See Contracts for the contracts used by each position system.

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Augmented Negative Risk

Standard negative risk requires the complete set of outcomes to be known at market creation. But sometimes new outcomes emerge after trading begins (e.g., a new candidate enters a race). Augmented negative risk applies to both CTF and Polymarket Protocol V2 markets. Augmented negative risk solves this with:

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Trading Rules for Augmented Neg Risk

• If the correct outcome at resolution is not named, the market resolves to “Other”
• The “Other” outcome’s definition changes as placeholders are clarified—avoid trading it directly

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Technical Details

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Conversion Mechanics

Conversion is atomic. Polymarket Protocol V2 uses the Router and NegRiskModule. CTF uses the Neg Risk Adapter.

1. You hold 1 No position for Outcome A
2. Call the conversion operation for the market’s position system
3. You receive 1 Yes position for every other outcome in the event

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Next Steps