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How do prediction markets account for interest rates? I feel like I should be willing to pay no more than ~96 cents for a contract that will definitely resolve

How do prediction markets account for interest rates? I feel like I should be willing to pay no more than ~96 cents for a contract that will definitely resolve to a dollar in a year. Who puts up the other 4 cents?

computerphage 8mo ago
The usual thing is that the market ends up around $0.95 for things like that, if the actors are all solid investors. It only takes one overly enthusiastic yes buyer to break that ceiling, the smart money won't "correct" it down to $0.95 There's another idea, which is make contacts that pay out in shares of an ETF, but I haven't seen this idea put into practice
- lowbatt 8mo ago
  that's correct. Also Kalshi does pay out interest on, and Poly does on a few markets
samvimes 8mo ago
Kalshi pays interest on open positions
pants2 8mo ago
Interest on open positions. Polymarket pays about 4.00% annualized holding rewards on eligible markets/positions (not all). Kalshi pays about 3.25% APY on cash plus open positions (collateral). Edit to add that on non eligible markets your theory is correct, for example: https://polymarket.com/event/will-jesus-christ-return-before-2027 https://polymarket.com/event/will-jesus-christ-return-before...