Why Polymarket Traders Underestimate Black Swan Tail Risk: The Mispricing of Extreme Outcomes
Polymarket prices most outcomes as a mathematical reflection of aggregate trader belief, yet systematic deviations appear around low-probability events with extreme consequences. A geopolitical rupture, nuclear escalation, or pandemic-class disruption might carry real probability—say, 2 to 5 percent—yet trade at 0.3 to 1 percent. This is not noise. It is a measurable, repeatable pattern where
