Module 04 · Paper Decision Logic
Paper Exposure Limits and No-Action Rules
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Course outline
Module 1 · Prediction Markets 101
Module 2 · Market Research
Module 3 · Signal Aggregation
Module 4 · Paper Decision Logic
Module 5 · Risk and Responsible Research
Paper exposure is a fictional point budget used to test whether a forecasting method would respect limits. It is not a recommendation for real funds, a bankroll formula, or evidence that live execution would match simulation. Start with no-action rules: conditions under which the safest decision is to abstain.
// concept
Build Hard No-Action Gates
Record NO PAPER ACTION when:
- contract/resolution wording is ambiguous;
- named resolution source is unavailable or disputed;
- market data is stale, one-sided, or too thin for the paper fill assumption;
- evidence depends on nonpublic, unlawfully obtained, or manipulative information;
- geographic/terms/legal eligibility is unclear;
- the event involves personal harm or unethical research scope;
- the model is outside its evaluated category;
- a source packet has unresolved contradiction;
- the learner is emotionally distressed, chasing loss, or unable to stop.
Abstention is a valid forecast-system output. A process that must act on every event will invent confidence.
// concept
Define a Fictional Point Budget
Use 100 paper points with no conversion to PKR or real currency. Cap per-event points, total correlated-theme points, daily decisions, and worst-case paper loss. Keep limits fixed for a full evaluation period.
Avoid formulas such as Kelly sizing in a beginner course: their inputs require calibrated probabilities and execution assumptions, and estimation error can produce aggressive outputs. A simple fixed paper unit or small tiers tied to predeclared evidence quality is easier to audit.
Example teaching policy:
0 points: any no-action gate fails
1 point: eligible but uncertain
2 points: evidence complete and method inside validated scope
maximum 5 open points in one correlated themeThese numbers are arbitrary simulation controls, not financial advice.
// concept
Model Correlation and Worst Case
Several markets may depend on the same election, policy decision, court case, or macro event. Treat them as one risk cluster. Sum worst-case paper outcomes across related positions and document why diversification may be illusory.
Also model resolution/operational uncertainty: invalidation, delay, wide spread, and inability to exit. Paper simulations that assume every desired fill and immediate exit are optimistic.
// worked_example
Worked Example
Five markets concern the same regulator decision. A naive system allocates two points to each and calls them diversified. The cluster cap permits only five total points, while two markets fail the resolution-clarity gate. The paper ledger records three eligible decisions totaling five points.
When the event resolves, results are reviewed as one correlated thesis, not five independent wins.
// failure_cases
Failure Cases
7 cases to diagnose
Converting paper points into a deposit suggestion.
Using a precise sizing formula with uncalibrated probabilities.
Ignoring correlated markets and common sources.
Relaxing limits after a simulated loss or exciting headline.
Assuming paper fills at midpoint.
Counting abstentions as missed profit rather than risk control.
Treating paper success as readiness for real money.
// pakistan_angle
Pakistan Angle
Do not translate the point budget into PKR. The course cannot establish a learner’s legal eligibility, platform protections, tax treatment, or personal suitability. Current PVARA/SECP guidance and qualified advice would be required before any real activity; the safest course scope remains paper-only.
Avoid WhatsApp/Telegram groups selling “signals,” guaranteed returns, or account access. SECP has warned about unlicensed online trading/investment schemes and unrealistic returns.
// hands_on
Hands-On Exercise
Write a 12-gate no-action policy, a 100-point fictional budget, per-event/theme/time caps, and stop rules. Apply it to ten historical/public snapshots without knowing outcomes where possible. Record every abstention and run a worst-cluster scenario.
// completion_rubric
Completion Rubric
3 grading bands
- Complete
hard gates precede scoring, paper points never map to funds, correlation and fill uncertainty are included, and limits stay fixed.
- Needs revision
caps exist but abstention, correlation, or operational risk is incomplete.
- Not complete
the worksheet recommends real sizing, deposits, or circumvention.
// sources