Prediction market risk / System brief 2026
Pararail is building a configurable protection layer for prediction-market positions. Import an exposure, choose a coverage level, preview the payout mechanics, and preview a market-aware premium modeled live from the current prediction-market order book.
Built for Polymarket and Kalshi workflows
Loss vector / Illustrative
Live Polymarket position
Product layer / Unsigned pricing demo
Explore captured market books at your chosen size. See the modeled hedge cost and a separately disclosed surcharge—not a live or executable quote. Choose your coverage and compare the full price, with no preset price ceiling.
Loading live markets…
1 unit represents 1 modeled unit of USDC collateral, with 6 decimals. These are not funded USDC balances. Size is hypothetical notional, not verified position ownership or cost basis.
No preset price ceiling in this calculator. Set your own optional maximum and adjust coverage in 1% steps. Contract purchase limits remain unchanged; a displayed estimate is not purchase approval.
The two-vault capital design is a separate demonstration. This calculator models a hypothetical hedge-cost pool, not a hedge the vault currently holds.
Explore the two-vault mechanicsConditional on acquiring and holding the full matching hedge; not measured fills, cash flows, or an offer of payout. Hedge proceeds fund the customer payout—they are not added together.
| Protected outcome | Hedge redemption | Customer payout |
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Historical fees, gas, collateral basis, and redemption timing are NOT_STATED. An all-in price cannot be established. Production pricing is not approved.
T19 illustrative model: 15% platform fee / 85% hedge-cost pool. This is not the two-vault 15/68/17 allocation. Hedge cost rounds up to 6 decimals; surcharge is the residual so the displayed components add up.
Curated surviving markets, not a representative sample. Raw Parquet partitions are not rehashed by this API; last book-event time is NOT_STATED. Source time is the reconstructed state time.
Live indicative pricing off public Polymarket books. No signature, order, payment, or coverage contract is created; not an executable offer. The two-vault capital view is a separate demonstration.
How it works / Proposed segregated-capital design
Future payouts are intended to be funded by segregated vault capital rather than Pararail's corporate balance sheet. The current system is simulated.
A planned account connection retrieves supported prediction-market positions.
Measure conservative payout risk, executable hedge cost, marginal portfolio capital, reserves, and customer value. Reject when any required input is missing.
A defined market outcome is checked programmatically through decentralized oracles.
Future contracts are designed to settle after a supported resolution source confirms the trigger.
Algorithmic risk modeling
Shadow Alpha evaluates the proposed architecture, not production premiums. Pricing remains disabled while execution, capital, reserve, and calibration inputs are incomplete.
System invalidation triggers
Planned software locks pause new coverage when a monitored threshold is breached while existing obligations remain governed by their contract terms.
Market gap / The downside crisis
Prediction-market volume is scaling faster than accessible risk tooling. Manual offsets and institutional OTC hedges remain capital-intensive or closed to retail traders.
Sources: Pew Research Center, The Wall Street Journal, Bloomberg, and Sportico. Volume is notional taker volume, not cash deposited or platform revenue. Figures are contextual, not forecasts.
ERC-4626 capital structuring
In the proposed architecture, a successfully cleared premium would fund a tokenized vault with two capital tiers. The tranche shares and required compensation are not yet calibrated.
Loss absorption order
Room A absorbs losses first only up to available capital. Both rooms remain exposed to loss. Principal and yield are not guaranteed. The proposed ERC-4626-based implementation remains subject to testing, audit, and deployment controls.
Pricing discipline / Fail closed
The gross floor must fund the conservative vault, platform, and tranche requirements. It must also fit below the customer's executable alternative and the configured on-chain maximum. Otherwise the quote is rejected.
The research configuration currently models 15% for the platform, 68% for Room A, and 17% for Room B. These are prototype parameters—not finalized economics. Production pricing remains unapproved pending full-size executable order-book costs, fees and gas, cross-event dependence, Expected Shortfall settings, LP capital and lockup charges, operating margin, reserves, demand, and measured value over self-hedging.
Execution verification
Deterministic replay and research diagnostics are complete. Production pricing remains disabled until the missing economic inputs and execution path are qualified.
Initial Columbus trader cohort identified.
Architecture and diagnostic replay completed; no production rate approved.
Measuring execution, capital, reserve, calibration, and customer-value inputs.
Contributing engineers under executed PIIA agreements.
Audit, legal review, capital controls, and launch criteria.
Pre-seed execution plan
Pararail is raising $1 million in pre-seed financing to fund full-time contract engineering, an independent security audit, and initial vault liquidity. The allocation remains a plan, not committed capital.
The long game
The same oracle-triggered settlement primitive can extend to other binary financial outcomes. Each expansion is optional; prediction-market protection comes first.
Become the default one-click risk layer for prediction exchange flow.
Apply the settlement logic to climate, outage, and supply-chain risk.
Extend the architecture to broader binary financial exposures.
Get in touch / Protocol team
Reach out about custom coverage, underwriting liquidity, the Shadow Alpha, or the current pre-seed plan.