Election predictions are arbitrage-free: response to Taleb

Aubrey Clayton

Quantitative Finance, 2019, vol. 19, issue 11, 1771-1774

Abstract: Taleb [Election predictions as martingales: An arbitrage approach. Quant. Finance, 2018, 18, 1–5] claimed a novel approach to evaluating the quality of probabilistic election forecasts via no-arbitrage pricing techniques and argued that popular forecasts of the 2016 U.S. Presidential election had violated arbitrage boundaries. We show that under mild assumptions all such political forecasts are arbitrage-free and that the heuristic that Taleb's argument was based on is false.

Date: 2019
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DOI: 10.1080/14697688.2019.1639802

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