How a side is priced

Before the first purchase

The opening model estimates the expected move in the difference between the accounts' profit.

It uses a t distribution with 4 degrees of freedom. The opening price is clamped between 15 and 85 cents.

The live board uses the selected window's profit spread and historical volatility to supply the model.

This price describes the model, not a promise about the decision.

The pool moves with purchases

A fixed-product pool is seeded at 25,000. The seed divides between the two sides according to the opening price.

price A = reserve B / (reserve A + reserve B)

The opposite reserve determines A's share of the combined reserves.

reserve A * reserve B = constant

A purchase adds to the opposite reserve and reduces the chosen reserve while preserving their product.

Buying a side raises its next price. Larger purchases can move it further.

The fill is refused when its average price exceeds the quoted price by more than 5 cents.

Try the published pool arithmetic in the lab.

The published parameters

The distribution is implemented in t4CDF and openingPrice in js/bout-market.js. The pool uses seedPool, poolQuote, and buy.