Is Polymarket's combination arbitrage a money printer? Arbitrageurs made nearly $40 million in a year. The authors of the paper released last week revealed the huge profits of combination arbitrage (cross-market arbitrage), while the paper introduced their methods and techniques for automated arbitrage market analysis using LLM, which are worth collecting and studying 👇.

Yesterday, while researching the orderfilled event, I came across this paper "Unravelling the Probabilistic Forest: Arbitrage in Prediction Markets". Later, I found out that my big brother had already shared it a few days ago. Thank you sincerely.
Paper link:
Author: @OSGbyte

Simple interpretation:
1. Mainly analyzed two types of arbitrage:

• Rebalancing arbitrage (within the same market/same conditions) - If the sum of all "YES" probabilities (or YES+NO) does not equal 1, you can buy a trap to lock in profits;

• Combination Arbitrage (Cross-Market) — When two markets are logically dependent on each other, form a combination that guarantees "at least one winning bet no matter what."

2. Data Source: Capture OrderFilled / PositionSplit / PositionsMerge events from Polymarket on Polygon and reconstruct the price at each point in time based on the volume-weighted average price (VWAP).

3. The opportunities in the rebalancing arbitrage type are most concentrated in sports and politics;

4. The arbitrageur has a total profit of 40 million dollars, with the top address making a profit of 2 million dollars;

5. Using LLM can assist in analyzing the combination arbitrage market; however, in individual markets, issues such as circular reasoning may still be encountered.