Pricing Formula

The FPMM maintains a constant mathematical relationship between the balances of all outcomes in a market. For a binary market with two outcomes (e.g. "Alice Wins" vs. "Bobby Wins"), the following relationship holds:

x * y = k

Where:

• x is the number of shares remaining in the pool for Outcome A

• y is the number of shares remaining in the pool for Outcome B

• k is a constant product

When shares are purchased in one outcome, the relative balance of that outcome decreases, and the price increases accordingly. To maintain the product constant, the price of the other outcome adjusts inversely. This is what drives real-time price movement in CalledIt markets.

The system extends to markets with more than two outcomes, using a generalized form of the constant product logic.