Arbitrage Capacity Rescue
A committed PMarket Arena template showing why correction depends on arbitrage capacity after a mispricing opens.
Question
When does arbitrage close event-market mispricing, and when does correction lag because the first arbitrage desk is too small?
Mechanism
Arbitrage is not just a logic condition. Correction depends on available capital, inventory limits, spread, impact, timing, and the risk of absorbing flow before rescue capacity arrives.
Setup
- Run arbitrage_capacity_rescue.json for 160 ticks with 100,000 simulated agents.
- Begin with weak arbitrage capacity, then inject bad news at tick 24.
- Add 8% arbitrageurs at tick 62 and track price-truth error, correction share, recovery time, and residual error.
Selected ticks from the committed PMarket Arena arbitrage template. The gap opens after bad news, then narrows after added arbitrage capacity.
Source artifact
PMarket Arena template scenarios/templates/arbitrage_capacity_rescue.json, run through the Node calibration harness for 160 ticks.
160
Rows
0.517
Max dev
55.6%
High error
41 ticks
Dislocated
0.461
Correction
18.67 ticks
Recovery
Result
The template run retained 160 rows, reached max deviation of 0.517, and spent 41 ticks in dislocation. After added correction capacity, event recovery measured 18.67 ticks and final error narrowed to 0.024.
Boundary
This browser-template run demonstrates correction-capacity mechanics. It does not define a universal arbitrage threshold or estimate correction capacity on a live venue.
Real Market Context
On regulated venues, binary event contracts settle against posted collateral and capital is fragmented across exchanges, so correction depends on who can post collateral and how quickly it arrives. That is the capacity limit this run isolates: arbitrage as a bounded supply of correction capital, not a frictionless logic condition.
17 CFR Part 40→