Is Polymarket's portfolio arbitrage a money-making machine? Arbitrageurs have raked in nearly $40 million in a single year. In a paper published last week, the authors revealed the enormous profits of portfolio arbitrage (inter-market arbitrage). The paper also describes their methods and techniques for automated arbitrage market analysis using LLMs. It's worth saving and studying! Yesterday, while researching the orderfilled event, I came across the paper, "Unravelling the Probabilistic Forest: Arbitrage in Prediction Markets." I later realized that a good friend had already shared it a few days ago. Thank you so much. Paper Link: https://t.co/Nxo0UWt0M9 Author: @OSGbyte Brief Explanation: 1. Two main types of arbitrage are analyzed: • Rebalancing arbitrage (within the same market/same conditions) – if the sum of all "yes" probabilities (or yes + no) ≠ 1, a trade can be purchased to lock in a profit; • Combination arbitrage (across markets) – when two markets are logically dependent, a combination is created to guarantee at least one win. 2. Data Source: Captured OrderFilled/PositionSplit/PositionsMerge events from Polymarket on Polygon, and prices at each point in time are reconstructed using volume-weighted average price (VWAP). 3. Opportunities in rebalancing arbitrage are most concentrated in sports and politics; 4. Arbitrageurs have a total profit of $40 million, with the top addresses making $2 million; 5. Using LLM can assist in analyzing combination arbitrage markets, however, circular reasoning and other issues can still be encountered in some markets.