Definitions · OTC event perpetuals and probability options

Event Perpetual and Probability Option Definitions

Definitions that two counterparties can incorporate by reference into an OTC confirmation for a perpetual contract, or an option, on the probability of an event: what it references, how the probability index and funding are calculated on an underlying bounded by 0 and 1, what happens in the run-up to resolution and at resolution, how margin covers the jump to resolution, and how the contract is closed out under the 2002 ISDA Master Agreement. Every Transaction references an Event Contract defined under the PMI Event Contract Specification, which left perpetual contracts out of scope.

PMI-EPD 0.1.0Published 5 Oct 2026

Status: Draft for public comment — the Institute’s working proposal, to be decided by the standards council once seated. Nothing in it has been adopted by any firm, venue or regulator. Comments are invited from anyone; members comment on the record.

Why it is needed

The Event Contract Specification (ECS 0.1) settled how an OTC event contract is defined, resolved and governed, and expressly left perpetual (non-expiring) event contracts out of scope. Perpetual contracts that track the probability of an event, and options on that probability, are nonetheless traded. There is no shared definition of what such a contract references, how its index is built, how funding works on an underlying bounded by 0 and 1, or what happens to the contract when the event resolves.

The existing documentation does not reach these questions. The 2002 ISDA Master Agreement is product-agnostic: it supplies events of default, close-out and netting, but not the economics of any product. The ISDA Digital Asset Derivatives Definitions (2023) cover non-deliverable forwards and options on bitcoin and ether only. As far as we have found, no ISDA documentation addresses perpetual contracts on event probabilities, funding rates on a bounded 0–1 underlying, or the behaviour of a perpetual when its event resolves.

Regulatory developments in the United States in 2025 and 2026 on perpetual-style contracts have concerned perpetuals on digital commodities. A perpetual on an event probability sits outside them; traded over the counter between eligible contract participants it would likely be treated as a swap. This document takes no position on that question. It is classification-neutral, gives no legal advice, and is written so the same economic terms can be documented whichever regime applies.

The failures it is written to prevent are specific to a bounded underlying that ends at exactly 0 or 1. A funding formula that divides by the index explodes as an event becomes unlikely. A pricing model that assumes an unbounded lognormal underlying mis-values a close-out. A perpetual whose resolution behaviour is undefined has no settlement value at the one moment its value is certain. Margin sized from day-to-day movement misses a loss that arrives in a single step. And default-management devices common on perpetual venues — auto-deleveraging, socialised losses — can be read into bilateral documents that never mentioned them. Without shared definitions each firm writes its own, and counterparties discover the differences at resolution.

Scope

Perpetual contracts referencing the probability of one or more ECS Event Contracts, traded bilaterally over the counter: Settling, Rolling, Continuous Probability, Conditional, Spread, Basket and Variance Event Perpetuals.
Probability Options: calls, puts and binary options on an event probability, and the models used to value them.
Construction of the Probability Index and Mark Price, funding, the Resolution Zone, final settlement and rolls.
Margin sized for jump-to-resolution risk, and close-out under the 2002 ISDA Master Agreement.
Calculation Agent duties, restricted persons, the Event Perpetual Identifier, an Elections Table with defaults, and a recommended reporting representation.

Out of scope

Exchange-listed or centrally cleared perpetual contracts, and the rules of any venue or clearing house.
Perpetual contracts on digital assets, currencies or any underlying that is not an event probability.
Regulatory classification of any Transaction (swap, future, security or otherwise), and legal, tax or accounting advice.
The definition and Determination of the underlying event, which belong to the Event Contract Specification.
Controls on trades executed by software agents, which are the subject of the sibling Agentic Execution Standard (PMI-AES).
Any amendment to the ISDA 2002 Master Agreement or to any credit support document.

How it relates to documents you already use

ISDA 2002 Master Agreement: The legal frame. These Definitions are incorporated into Confirmations under it and do not amend it. Early termination and the Close-out Amount remain governed by its Section 6; Section 13 of these Definitions states what a commercially reasonable determination of that amount should take into account for an event perpetual.
ISDA Credit Support Annex: Collateral moves under the parties’ CSA or other credit support document. These Definitions size initial and variation margin for jump-to-resolution risk; they do not change how, when or in what form collateral is transferred.
ISDA Digital Asset Derivatives Definitions (2023): Cover non-deliverable forwards and options on bitcoin and ether. They address neither event probabilities nor perpetual contracts. Nothing here relies on them, and the two can be incorporated side by side in one relationship.
ISDA Common Domain Model: The recommended machine-readable representation for reporting and processing (Section 15). The product qualifications proposed here are a non-binding proposal, not part of the model.
ISDA Credit Derivatives Determinations Committees: The model for independent determinations, including their move in 2026 toward independent administration. Determinations of an event under these Definitions go through the ECS route, which ends in an independent Determinations Committee.
PMI Event Contract Specification (ECS): Defines the underlying. Every Transaction references an ECS Event Contract by its Event Contract Identifier (ECI), which must conform at least to ECS-2. Terms defined in the ECS — Event Contract, Question, Outcome Set, Close Time, Resolution Source, Determination, Fallback Waterfall, Void, Determinations Committee, Restricted Person — keep their ECS meaning.
PMI failure-pattern registry: The Question of every Underlying Event Contract is checked against the registry through ECS conformance. Failures specific to perpetuals — funding that divides by a near-zero index, undefined behaviour at resolution — are candidates for new registry entries.
PMI Agentic Execution Standard (PMI-AES): Sibling standard for trades executed by software agents. Where an agent enters a Transaction under these Definitions, PMI-AES governs the controls on the agent and PMI-EPD the economics of the Transaction. Consents required inside the Resolution Zone should be treated as requiring express authority under the agent’s mandate.
Unique Product Identifier (ISO 4914): Section 15 proposes, without binding effect, how event swaps and probability options could be placed in a UPI taxonomy, using the ECI as the underlier identifier.

Definitions

Defined terms are capitalised where they are used.

ECS Definitions: Part B of the PMI Event Contract Specification, version 0.1 or a later version stated in the Confirmation. Event Contract, Question, Outcome Set, Close Time, Resolution Source, Determination, Disruption Event, Fallback Waterfall, Terminal Step, Void, Calculation Agent, Determinations Committee, Restricted Person and Event Contract Identifier (ECI) have the meanings given there.
Master Agreement: The 2002 ISDA Master Agreement, or other master agreement, under which a Transaction is documented, together with its schedule.
Confirmation: The document recording the terms of a Transaction, which incorporates these Definitions and states the elections in the Elections Table.
Transaction: An Event Perpetual or a Probability Option documented under a Confirmation that incorporates these Definitions.
Event Perpetual: A Transaction with no scheduled maturity whose value tracks a Probability Index derived from one or more Underlying Event Contracts, and in which the parties exchange variation margin and Funding Amounts until the Transaction terminates.
Underlying Event Contract: An Event Contract, described by an ECS document and identified by its ECI, that a Transaction references. It defines the event, the Outcome and the Determination; the Transaction does not redefine them.
Referenced Outcome: The Outcome in the Outcome Set of an Underlying Event Contract whose probability the Probability Index measures.
Quantity: The signed number of units of a Transaction. A positive Quantity is a long position, which gains when the Probability Index rises; a negative Quantity is a short position.
Contract Multiplier: The amount, in the settlement currency, by which a change of 1.00 in a probability, index or value is multiplied for one unit of Quantity.
Trade Price: The probability, between 0 and 1, at which the parties entered into a Transaction or an increase in its Quantity.
Settling Event Perpetual: An Event Perpetual on the Referenced Outcome of one Underlying Event Contract that terminates at Final Settlement when that Underlying Event Contract is Determined or Void.
Rolling Event Perpetual: An Event Perpetual that references one Event Contract in an Event Series at a time and, on each roll, references the next one, with a Roll Adjustment Amount so that the roll itself transfers no value.
Event Series: An ordered sequence of Event Contracts identified by a rule stated in the Confirmation, each differing from the last only in its Close Time and the dates stated in its Question — for example, successive scheduled meetings of one body.
Continuous Probability Perpetual: An Event Perpetual referencing a constant-horizon index: the probability, interpolated from the Event Contracts in an Event Series, that the event occurs within a fixed period from the time of calculation. It has no Final Settlement Value.
Conditional Event Perpetual: An Event Perpetual on the probability of a target Outcome given a Conditioning Event, which is dormant until the Conditioning Event is Determined and then either becomes a Settling Event Perpetual or is settled on its Void Settlement Basis.
Conditioning Event: The Outcome of a second Underlying Event Contract on which a Conditional Event Perpetual is conditional.
Spread Event Perpetual: An Event Perpetual on the difference between the Probability Indices of two Underlying Event Contracts, taking values between −1 and 1.
Basket Event Perpetual: An Event Perpetual on a fixed weighted sum of the Probability Indices of two or more Underlying Event Contracts.
Variance Event Perpetual: An Event Perpetual on the realised variance of a stated Probability Index: the sum of squared changes in that index, sampled at a stated interval over a stated trailing window, each change capped at a stated amount.
Probability Option: A call, put, binary call or binary put whose settlement price is a Probability Index or the Final Settlement Value of an Underlying Event Contract, with a strike between 0 and 1.
Reference Venue: A trading venue named in the Confirmation whose quotes or executed prices for the Referenced Outcome may be used as Eligible Inputs.
Reference Dealer: A dealer named in the Confirmation whose firm quotes for the Referenced Outcome may be used as Eligible Inputs.
Eligible Input: A quote or executed price from a Reference Venue or Reference Dealer that meets every condition in Section 4 at the time of a calculation.
Staleness Limit: The maximum age of a quote or executed price, measured from its timestamp to the time of calculation, for it to count as an Eligible Input.
Contributor Share Cap: The maximum fraction of the Eligible Inputs used in any calculation that may come from one party to the Transaction together with its Affiliates, or from any one source.
Probability Index: The value between 0 and 1, calculated under Section 4, that measures the probability of the Referenced Outcome, or for a multi-event Transaction the combination of such values stated in Section 10.
Index Disruption: Any calculation at which fewer Eligible Inputs remain than the stated minimum, or at which the Calculation Agent cannot calculate the Probability Index under the stated method.
Mark Price: The value used for variation margin and the Premium Component: equal to the Probability Index unless the Confirmation elects a separate method under Section 5.
Funding Interval: The period at the end of which a Funding Amount is calculated and becomes payable.
Premium Component: The measure, over a Funding Interval, of how far the Mark Price has traded from the Probability Index, in the absolute form (probability points) or the relative form (a fraction of the index) stated in Section 6.
Interest Component: An elected addition to the Premium Component reflecting a stated interest rate. Zero unless elected.
Funding Rate: The sum of the Premium Component and the Interest Component for a Funding Interval, limited to the Funding Cap.
Funding Cap: The largest absolute value a Funding Rate may take for one Funding Interval.
Funding Amount: The amount payable between the parties at the end of a Funding Interval, calculated from the Funding Rate, the Quantity and the Contract Multiplier.
Probability Floor: The level of the Probability Index below which the relative form of the Premium Component may not be used.
Resolution Zone: The state defined in Section 7, entered when the Probability Index is within the Resolution Zone Threshold of 0 or 1, during the Pre-Resolution Window, or after the Close Time until Final Settlement, in which margin, trading and funding rules are tightened.
Resolution Zone Threshold: The distance ε from 0 or 1 within which the Probability Index places a Transaction in the Resolution Zone.
Pre-Resolution Window: The stated period ending at the scheduled Close Time of an Underlying Event Contract.
Funding Freeze Time: The time after which no Funding Amount accrues on a Transaction in respect of an Underlying Event Contract, determined under Section 8.
Final Settlement Value: The value, between 0 and 1, fixed by the Determination of an Underlying Event Contract under Section 8, or by its Void Settlement Basis.
Final Settlement Amount: The amount payable on Final Settlement, calculated under Section 8 from the Final Settlement Value.
Interim Settlement Percentage: The elected fraction of the Final Settlement Amount, calculated on the initial Determination, that is paid while a dispute about that Determination is pending.
Void Settlement Basis: How a Transaction settles when its Underlying Event Contract is Void, or a Conditioning Event is not met: an entry-price unwind or a stated fixed value. Never a traded price, the Probability Index or the Mark Price.
Roll Price: The value at which an outgoing or incoming Event Contract is taken at a roll of a Rolling Event Perpetual, calculated under Section 9.
Roll Adjustment Amount: Quantity × Contract Multiplier × (incoming Roll Price − outgoing Roll Price): the value that the change of reference at a roll would otherwise transfer, which is recorded and not paid.
Jump-to-Resolution Loss: The loss a party would suffer on a Transaction if every Underlying Event Contract it references were Determined against it from the current Mark Price, calculated under Section 12.
Bounded-Support Model: A valuation model that assigns zero probability to values of the underlying probability outside [0, 1], and whose terminal distribution at the Close Time is concentrated on the possible Final Settlement Values.
Bilateral Default Management: The optional, expressly elected arrangements in Section 13 — a substitute counterparty or third-party protection — that apply on a party’s default in addition to the Master Agreement.
Elections Table: Section 16: every election a Confirmation must state, and the fallback that applies if it is omitted.
Event Perpetual Identifier: A fingerprint of a Transaction’s economic terms, derived by the method in Section 15 from the ECI of each Underlying Event Contract and the economic elections, so that the same terms carry the same identifier wherever they trade.

Requirements

“Shall” is a requirement, “should” a recommendation, “may” a permission. Cite a clause as PMI-EPD 2.3.

1. Incorporation, interpretation and status

A confirmation that incorporates several documents without saying which governs leaves a calculation agent, or a court, to guess when they conflict. These clauses fix the order of precedence and keep the text from being read as an amendment to the master agreement, a regulatory classification or legal advice.

1.1A Confirmation may incorporate these Definitions by stating that it incorporates the “PMI-EPD Event Perpetual and Probability Option Definitions, version 0.1.0”. A Confirmation that does so shall also incorporate the ECS Definitions, and every term defined in the ECS Definitions shall have the same meaning in these Definitions.
1.2These Definitions shall not amend the Master Agreement or any credit support document. In the event of inconsistency the order of precedence shall be: the Confirmation; then these Definitions; then the ECS Definitions — save that the ECS Definitions shall prevail on any question of how an Underlying Event Contract is Determined. The relationship between the Confirmation and the Master Agreement shall be as the Master Agreement provides.
1.3Nothing in these Definitions shall be read as characterising a Transaction as a swap, a future, an option, a security or any other regulatory category, or as legal, tax or accounting advice. Each party shall remain responsible for determining the regulatory treatment of each Transaction and for its own compliance, including eligibility, reporting, margin and clearing obligations.
1.4Every probability, index, price and value referencing a probability shall be expressed as a decimal number between 0 and 1 inclusive (“probability points”), and every amount in the settlement currency of the Underlying Event Contract unless the Confirmation states otherwise. Times shall be stated in ISO 8601 with an explicit offset, and durations as ISO 8601 durations.
1.5Intermediate values shall not be rounded. Published Probability Index, Mark Price and Funding Rate values shall be rounded half-even to no fewer than six decimal places, and amounts half-even to the smallest unit of the settlement currency.
1.6Where a Confirmation omits an election listed in the Elections Table, the fallback stated there shall apply. A Confirmation that relies on a fallback should say so.
1.7These Definitions are published under the Creative Commons Attribution 4.0 licence. No requirement in them shall be capable of being met only by using a particular firm’s platform, software, data, keys or service, or a service provided by the Institute; any implementation that produces the results specified may be used.
1.8A firm may state that a Transaction or its documentation conforms to a tier in the conformance table only on the basis of an assessment by assessors independent of the firm, published with its result. The Institute shall not assess firms itself.

2. The Underlying Event Contract

A perpetual on a loosely described event inherits every resolution failure the ECS was written to prevent — and, with no expiry, has no date by which the ambiguity must be faced. Anchoring each Transaction to an ECS-conformant Event Contract means the event, its source, its fallbacks and its void rule are defined once, outside the perpetual.

2.1Every Transaction shall reference one or more Underlying Event Contracts, each identified in the Confirmation by its ECI and described by an ECS document available to both parties at the trade date.
2.2Each Underlying Event Contract shall conform at least to ECS-2 (Resolvable) at the trade date. A Transaction referencing an Event Contract that does not shall not be described as conforming to these Definitions.
2.3The Confirmation shall state the Referenced Outcome for each Underlying Event Contract. Where the Outcome Set is binary and no Referenced Outcome is stated, the first-listed Outcome shall be the Referenced Outcome; where it is categorical, the Referenced Outcome shall be stated and no fallback applies.
2.4Where an Underlying Event Contract is scalar, its payout formula shall state a floor and a cap, and the value used by these Definitions shall be the normalised value (min(max(X, Floor), Cap) − Floor) / (Cap − Floor), where X is the Determined value. A scalar Event Contract without a floor and a cap shall not be referenced.
2.5The Close Time, Resolution Source, determination deadline, Fallback Waterfall, dispute route and void settlement of each Underlying Event Contract shall govern its Determination for every Transaction that references it. No Transaction shall create a separate determination of whether, or to what extent, the event occurred.
2.6If the ECS document of an Underlying Event Contract is changed after the trade date so that its ECI changes, the Transaction shall continue to reference the ECI stated in the Confirmation unless both parties agree in writing to substitute the new one.

3. Product archetypes

Products sold under the same name behave differently at resolution: some settle, some roll into the next event, some never reference a single event at all. A confirmation that does not say which leaves the most valuable moment in the contract’s life undefined.

3.1Each Confirmation shall state exactly one archetype from this Section for each Transaction.
3.2A Settling Event Perpetual shall track the Probability Index of the Referenced Outcome of one Underlying Event Contract and shall terminate at Final Settlement under Section 8.
3.3A Rolling Event Perpetual shall reference the current Event Contract of an Event Series, shall roll under Section 9, and shall not terminate by reason of a Determination.
3.4A Continuous Probability Perpetual shall reference a constant-horizon index calculated under Section 9 and shall have no Final Settlement Value; it shall terminate only by agreement, under the Master Agreement or under Section 4.
3.5A Conditional Event Perpetual shall reference a target Underlying Event Contract and a Conditioning Event, and shall follow Section 10.
3.6A Spread Event Perpetual shall reference exactly two Underlying Event Contracts, and a Basket Event Perpetual two or more with fixed weights stated in the Confirmation; both shall follow Section 10.
3.7A Variance Event Perpetual shall reference one stated Probability Index and shall follow Section 10.
3.8A Probability Option shall follow Section 11, and may reference either the Probability Index of an Underlying Event Contract or its Final Settlement Value.
3.9A Transaction combining archetypes — for example a rolling basket — may be documented under these Definitions only if the Confirmation states, for each constituent, which archetype’s rules apply at its roll, resolution or Void.

4. Probability Index

An index that one contributor can move, that keeps printing on stale quotes, or that strays outside [0, 1] creates funding and margin payments nobody agreed to. These clauses fix what counts as an input, how inputs combine, and what happens when there are too few.

4.1The Confirmation shall name each Reference Venue and Reference Dealer. The Calculation Agent shall not use a price from any source that is not named.
4.2Where a Reference Venue lists a contract not documented under the ECS, the Confirmation shall identify that contract and state every difference between its terms and those of the Underlying Event Contract. A contract that differs in Resolution Source, Close Time or Outcome Set shall not provide Eligible Inputs unless the Confirmation expressly accepts the difference.
4.3A price shall be an Eligible Input only if it is the mid of a firm, executable two-way quote, or an executed price, for the Referenced Outcome; its age does not exceed the Staleness Limit; the quote’s bid–offer spread does not exceed the elected maximum spread; and its size is at least the elected minimum size.
4.4A price from a Transaction between the parties to the Transaction being calculated shall not be an Eligible Input or a fallback value.
4.5At each calculation, no more than the Contributor Share Cap of the Eligible Inputs shall come from one party together with its Affiliates, or from any one source. Where that share would be exceeded, the excess inputs from that party or source shall be excluded, retaining its most recent.
4.6At least at every elected calculation interval, the Calculation Agent shall: take the median of the Eligible Inputs (the mean of the two middle values where their number is even); exclude any input that differs from that median by more than the elected outlier threshold; and take the median of the inputs that remain as the spot value.
4.7The Probability Index shall be the time-weighted average of the spot values over the elected index window ending at the calculation, clamped to [0, 1]: Probability Index = min(1, max(0, time-weighted average)).
4.8An Index Disruption shall occur if, after exclusions, fewer than the elected minimum number of Eligible Inputs remain, or they come from fewer than two sources that are not Affiliates of each other.
4.9On an Index Disruption the last valid Probability Index shall be held for no longer than the elected maximum hold period, and the Premium Component shall be zero for the time it is held.
4.10If the Index Disruption continues beyond the maximum hold period, the following steps shall apply in order, each only if the one before fails: (a) a poll of the fallback Reference Dealers named in the Confirmation, at least three and none an Affiliate of either party; (b) postponement, during which no Funding Amount accrues, for no longer than the elected maximum index postponement; (c) a determination of a commercially reasonable value by the Calculation Agent, with written reasons, subject to the dispute route of the Underlying Event Contract.
4.11The Calculation Agent shall make available to both parties, at the end of each Funding Interval and within one hour of a request, the Probability Index, the number of Eligible Inputs used and excluded with the reason for each exclusion, and whether an Index Disruption was in effect.
4.12A change to the index methodology shall not apply to an existing Transaction without the written consent of both parties.

5. Mark Price

A separate mark lets funding reflect where the perpetual itself trades, but it is a second number someone can push. Unless the parties elect otherwise, the mark is the index; where they elect a separate mark, it is held within a band of the index and kept away from final settlement.

5.1Unless the Confirmation elects a separate method, the Mark Price shall equal the Probability Index.
5.2Where a separate method is elected, the Confirmation shall state it in full — for example, the median of the Probability Index, the Probability Index plus the time-weighted basis of quotes on the perpetual over the index window, and the mid of the best quotes on the perpetual at a named Reference Venue.
5.3A separately calculated Mark Price shall be clamped to the interval [max(0, Probability Index − Mark Band), min(1, Probability Index + Mark Band)], where the Mark Band is elected.
5.4A Mark Price shall not be derived solely from the quotes or executions of one party and its Affiliates, and during an Index Disruption shall equal the Probability Index then held or determined.
5.5The Mark Price shall be used for variation margin and the Premium Component, and may be elected for Close-out valuation. It shall not be used to determine a Final Settlement Value.

6. Funding

Funding keeps a perpetual near its index. The convention borrowed from perpetuals on unbounded assets expresses the premium as a fraction of the index — and on a probability that fraction divides by a number approaching zero as the event becomes unlikely: a one-point premium at an index of 0.01 is a funding rate of one hundred per cent. These clauses make the absolute form the default, and mandatory near the bounds.

6.1The Confirmation shall state the Funding Interval and the times at which Funding Intervals end.
6.2In the absolute form, the Premium Component for a Funding Interval shall be the time-weighted average over the interval of (Mark Price − Probability Index), in probability points.
6.3In the relative form, the Premium Component shall be the time-weighted average over the interval of (Mark Price − Probability Index), divided by the time-weighted average of the Probability Index over the same interval.
6.4The absolute form shall apply unless the relative form is elected. The relative form shall not be used for any Funding Interval in which the Probability Index fell below the Probability Floor, or the Resolution Zone was in effect, at any time; nor for a Spread, Basket or Variance Event Perpetual. For those intervals and products the absolute form shall apply.
6.5The Interest Component shall be zero unless an annual rate r is elected. Where elected, it shall be r × d / 365 × the time-weighted average of the Probability Index in the absolute form, and r × d / 365 in the relative form, where d is the length of the Funding Interval in days (Actual/365 Fixed).
6.6The Funding Rate shall be min(Funding Cap, max(−Funding Cap, Premium Component + Interest Component)).
6.7The Funding Amount shall be Quantity × Contract Multiplier × Funding Rate in the absolute form, and Quantity × Contract Multiplier × Probability Index at the end of the interval × Funding Rate in the relative form. A positive Funding Amount shall be paid by the long party to the short party, and a negative one by the short party to the long party.
6.8A Transaction entered into, increased, reduced or terminated during a Funding Interval shall accrue funding pro rata to the time each part of its Quantity was outstanding.
6.9No Funding Amount shall accrue after the Funding Freeze Time, while a Conditional Event Perpetual is dormant, or during an index postponement under Section 4.
6.10Funding Amounts shall be payments under the Transaction, not transfers of collateral. They shall be payable on the next Local Business Day after the end of the Funding Interval and shall be netted with other payments to the extent the Master Agreement’s payment netting applies. The parties may elect that Funding Amounts be netted against variation margin transfers on the same day, to the extent their credit support document permits.
6.11The Calculation Agent shall record, for each Funding Interval, the Premium Component, the Interest Component, whether the Funding Cap applied, and the form used, and shall make the record available to both parties.

7. Resolution Zone

As an event nears resolution, the index can move from 0.97 to 0 in a single publication. Margin calibrated to ordinary movement is then no protection, and a funding formula tuned for ordinary days can be gamed at the boundary. The Resolution Zone switches the Transaction into a regime sized for the jump.

7.1The Resolution Zone shall be in effect for an Underlying Event Contract when any of the following holds: (a) the Probability Index is at or below the Resolution Zone Threshold (ε), or at or above 1 − ε; (b) the time is within the Pre-Resolution Window; (c) the Close Time has passed and Final Settlement has not occurred.
7.2A Resolution Zone entered under (a) alone shall end only when the Probability Index has remained strictly between ε and 1 − ε for one full Funding Interval.
7.3A Spread, Basket, Conditional or Continuous Probability Perpetual shall be in the Resolution Zone whenever any Underlying Event Contract it references with non-zero weight is.
7.4The Calculation Agent shall notify both parties of the start and end of the Resolution Zone promptly. A failure to notify shall not suspend its effects.
7.5While the Resolution Zone is in effect, initial margin shall be not less than the full Jump-to-Resolution Loss, with no reduction under any confidence model.
7.6While the Resolution Zone is in effect, neither party shall enter into a Transaction, or increase a Quantity, that increases its Jump-to-Resolution Loss in respect of that Underlying Event Contract, without the other party’s express written consent given for that Transaction. A Transaction that reduces either party’s Jump-to-Resolution Loss may always be entered into.
7.7While the Resolution Zone is in effect, neither party shall write a new Probability Option referencing that Underlying Event Contract. Existing Probability Options shall continue on their terms.
7.8While the Resolution Zone is in effect, the absolute form of the Premium Component shall apply; the Funding Cap shall be the elected Resolution Zone funding cap; and variation margin shall be called, in addition to its regular schedule, whenever the Mark Price has moved by more than the elected intraday threshold since the last call.

8. Resolution and Final Settlement

A perpetual on an event that has happened must stop and settle at the answer. Without a freeze time, a settlement value taken from the determination, and rules for disputes and voids, the parties are left arguing over a contract that has no defined end — and, worse, tempted to settle at whatever the last trade printed.

8.1The Funding Freeze Time shall be the earliest of: the Close Time of the Underlying Event Contract; the time the Resolution Source first publishes the fact on which an Outcome is Determined, where it does so before the Close Time; and any earlier time elected in the Confirmation.
8.2From the Funding Freeze Time no Funding Amount shall accrue, and no new Settling Event Perpetual referencing that Underlying Event Contract shall be entered into, other than a Transaction that reduces an existing position. Variation margin should continue to be exchanged on the Probability Index while one is published.
8.3The Final Settlement Value shall be 1 if the Outcome Determined under the ECS is the Referenced Outcome and 0 if it is not, or the normalised value under Section 2 for a scalar Underlying Event Contract. It shall be taken only from the Determination, including any step of the Fallback Waterfall or decision of a Determinations Committee, and shall never be the Probability Index, the Mark Price or a traded price.
8.4The Final Settlement Amount for a long position shall be Quantity × Contract Multiplier × (Final Settlement Value − R), where R is the Mark Price at which variation margin was last settled or, if none was, the Trade Price; together with any Funding Amounts accrued and unpaid. A positive amount shall be paid by the short party and a negative amount by the long party.
8.5A Determination shall be final for these Definitions when the dispute window of the Underlying Event Contract ends without a dispute being raised, or when a dispute is finally decided. The Final Settlement Amount shall be paid within the settlement period of the Underlying Event Contract after the Determination becomes final, or within two Local Business Days if none is stated.
8.6If a dispute is raised, the party owing the Final Settlement Amount calculated on the initial Determination shall pay the Interim Settlement Percentage of it within the settlement period, and collateral securing the remainder shall be retained until the dispute is decided.
8.7On final Determination, the Final Settlement Amount shall be recalculated and the difference between it and the interim amount paid shall be paid by whichever party owes it within the settlement period, with interest at the rate under the parties’ credit support document if the Confirmation so elects.
8.8If an Underlying Event Contract is Void, the Transaction shall settle on its Void Settlement Basis: (a) an entry-price unwind, under which the Final Settlement Value of each Transaction or increase is its Trade Price and Funding Amounts already paid stand; or (b) a fixed value, under which the Final Settlement Value is the value stated in the Confirmation. Where no basis is elected, (a) shall apply if the Underlying Event Contract’s void settlement is return of premium, and (b) at its fixed payout, normalised to [0, 1], if it is a fixed payout.
8.9On a Disruption Event affecting an Underlying Event Contract, the Transaction shall remain frozen from the Funding Freeze Time, and Final Settlement shall not occur until a Determination or a Terminal Step of the Fallback Waterfall.
8.10Initial margin held in respect of a Transaction that has finally settled shall be returned within the period for return of collateral under the parties’ credit support document.

9. Rolling and continuous perpetuals

A roll settled at the wrong price transfers value from one side to the other on a schedule everyone can see coming. The roll adjustment makes the change of reference itself worth nothing, so that only genuine movements in probability move money; and a constant-horizon index needs its constituents and interpolation fixed in advance for the same reason.

9.1The Confirmation for a Rolling Event Perpetual shall state the Event Series, identifying each next Event Contract by ECI or by an ECS template whose only varying fields are the Close Time and the dates in the Question; the roll mode; and the roll window.
9.2In the roll-on-Determination mode, when the current Underlying Event Contract is finally Determined, the Final Settlement Amount shall be paid as for a Settling Event Perpetual without closing the Quantity, the outgoing Roll Price shall be the Final Settlement Value, and the Transaction shall then reference the next Event Contract in the Event Series.
9.3In the roll-before-resolution mode, the roll shall occur at the start of the Pre-Resolution Window of the current Underlying Event Contract, and the outgoing Roll Price shall be its Probability Index averaged over the roll window ending at the roll.
9.4In both modes the incoming Roll Price shall be the Probability Index of the incoming Event Contract averaged over the roll window ending at the roll. Variation margin shall be settled on the outgoing Event Contract up to its Roll Price, and the reference level for subsequent variation margin shall be the incoming Roll Price.
9.5The Roll Adjustment Amount shall be recorded and reported to both parties and shall not be paid, so that the change of reference transfers no value. Funding Amounts for the Funding Interval containing the roll shall be calculated pro rata on each reference.
9.6If the next Event Contract cannot be identified, or its Probability Index is disrupted beyond the maximum hold period, the roll shall be postponed for no longer than the elected maximum roll postponement. If the roll still cannot occur, the Transaction shall continue as a Settling Event Perpetual on the outgoing Underlying Event Contract, or, if that has already settled, shall terminate with no further payment.
9.7For a Continuous Probability Perpetual, the Confirmation shall state the horizon H and the Event Series, and the index shall be I_near + (I_far − I_near) × (t + H − T_near) / (T_far − T_near), where t is the time of calculation and I and T are the Probability Indices and Close Times of the two Event Contracts in the series whose Close Times most closely bracket t + H. An Event Contract within its Pre-Resolution Window shall not be used, and if no bracketing pair is available an Index Disruption shall occur.

10. Conditional, spread, basket and variance perpetuals

Combining events multiplies the ways resolution can arrive. A conditional probability computed by dividing by an unlikely condition explodes the same way relative funding does; a basket whose constituents resolve on different dates must say what each resolution does to the rest; and realised variance on a probability is dominated by the final jump unless the contract says otherwise.

10.1The Confirmation for a Conditional Event Perpetual shall state the target Underlying Event Contract, the Conditioning Event, and whether the Probability Index is taken from quotes on a conditional contract or computed as Index(A and B) / Index(B). The computed method shall be used only while Index(B) is at or above the Probability Floor; below it an Index Disruption shall occur.
10.2Until the Conditioning Event is Determined, the Conditional Event Perpetual shall be dormant: no Funding Amount shall accrue, and neither party shall increase its Quantity without the other party’s express written consent. Variation margin shall be exchanged on the conditional Probability Index unless the Confirmation elects otherwise.
10.3When the Conditioning Event is Determined to have occurred, the Conditional Event Perpetual shall become a Settling Event Perpetual on the target, or a Rolling Event Perpetual if so elected, and funding shall begin with the next full Funding Interval. If it is Determined not to have occurred, or its Underlying Event Contract is Void, the Transaction shall settle on its Void Settlement Basis.
10.4The Probability Index of a Spread Event Perpetual shall be Index(A) − Index(B). When one leg is finally Determined or Void its value shall be fixed at its Final Settlement Value, and the Transaction shall continue on the other leg until it too settles.
10.5The Probability Index of a Basket Event Perpetual shall be the sum of w_i × Index_i over its constituents, with the weights w_i fixed in the Confirmation. Weights shall be non-negative unless the Confirmation expressly permits otherwise, and the Calculation Agent shall not reweight.
10.6When a basket constituent is finally Determined or Void its contribution shall be fixed at w_i × its Final Settlement Value, and the basket shall terminate when every constituent has settled, unless the Confirmation states a replacement rule.
10.7The Probability Index of a Variance Event Perpetual shall be the sum of (I_k − I_(k−1))² over the samples of the referenced Probability Index taken at the elected sampling interval within the elected trailing window, each difference capped in absolute value at the elected increment cap. Samples taken during an Index Disruption shall be excluded.
10.8A Variance Event Perpetual shall use the absolute form of funding and shall terminate at the Funding Freeze Time of the Underlying Event Contract its referenced index tracks, with a Final Settlement Value equal to its Probability Index at that time. The change in the referenced index caused by the Determination shall be excluded unless the Confirmation elects to include it.
10.9For any multi-event Transaction the Calculation Agent shall calculate the Probability Index of each Underlying Event Contract separately under Section 4 before combining them.

11. Probability Options and valuation

An option on a probability has a payoff bounded by 0 and 1 and an underlying that ends at exactly 0 or 1. Models built for unbounded prices — Black–Scholes applied to the probability itself is the common case — put weight on impossible values and misstate value most where it matters: near the bounds and near expiry, which is where close-out disputes happen.

11.1The Confirmation for a Probability Option shall state its type (call, put, binary call or binary put), its strike K with 0 < K < 1, its expiry time, its exercise style, its reference (the Probability Index or the Final Settlement Value of a stated Underlying Event Contract), and its premium and premium payment date.
11.2The settlement price S shall be the referenced Probability Index averaged over the index window ending at the expiry time; but if the Underlying Event Contract is finally Determined before the expiry time, or the expiry time falls after its Close Time, S shall be its Final Settlement Value, and settlement shall be postponed until that value is final, with interim settlement under Section 8.
11.3The settlement amount payable by the writer shall be Quantity × Contract Multiplier × max(S − K, 0) for a call; × max(K − S, 0) for a put; × 1 if S > K and 0 otherwise for a binary call; and × 1 if S < K and 0 otherwise for a binary put.
11.4If the Underlying Event Contract is Void, S shall be determined by the Void Settlement Basis; under an entry-price unwind the premium shall instead be returned and no settlement amount shall be paid.
11.5Every valuation of a Probability Option or Event Perpetual for initial margin, Close-out or a dispute shall use a Bounded-Support Model. A model that assumes an unbounded lognormal underlying, including Black–Scholes applied to the probability itself, shall not be used for those purposes.
11.6A Bounded-Support Model may be, among others, a diffusion of the logit of the probability with stated volatility, or a beta distribution with stated parameters. At or after the Close Time it shall place all probability mass on the possible Final Settlement Values, weighted by the probabilities the Probability Index implies.
11.7The party relying on a valuation shall disclose the model and its parameters to the other party on request.

12. Margin and collateral

The largest loss a position on an event can suffer arrives in one step, when the event resolves. Initial margin sized from historical day-to-day movement misses it entirely; a counterparty that has posted it can lose its whole position overnight with nothing to cover the gap. These clauses size initial margin to the jump.

12.1The Confirmation shall state the credit support document under which margin is transferred. These Definitions determine amounts only and shall not change how, when or in what form collateral is transferred.
12.2Variation margin shall be calculated on the Mark Price and called at least once in every Funding Interval, and more often where Section 7 requires. The threshold applying to Transactions under these Definitions should be zero.
12.3The Jump-to-Resolution Loss of a long position in a Settling or Rolling Event Perpetual shall be Quantity × Contract Multiplier × Mark Price, and of a short position |Quantity| × Contract Multiplier × (1 − Mark Price). For a Spread, Basket or Conditional Event Perpetual it shall be the largest loss over every combination of Final Settlement Values of its Underlying Event Contracts consistent with their Outcome Sets; for a Continuous Probability Perpetual, the loss if the nearer constituent were Determined against the position, weighted by its interpolation weight; for a Variance Event Perpetual, the loss if the next sampled change equalled the increment cap; and for the writer of a Probability Option, its maximum settlement amount less any premium received.
12.4Initial margin shall be not less than the Jump-to-Resolution Loss, except that, outside the Resolution Zone only, the parties may elect a confidence model under 12.5 that reduces it to no less than the elected floor fraction of the Jump-to-Resolution Loss.
12.5A confidence model used to reduce initial margin shall be a Bounded-Support Model, shall include the probability that the event resolves within the margin period of risk, shall use a confidence level of at least 99 per cent, and shall be disclosed to the other party.
12.6Initial margin shall be recalculated at least once in every Funding Interval and on entry into the Resolution Zone. Additional initial margin shall be transferred within the time stated in the Confirmation, which should not exceed one Funding Interval.
12.7A buyer of a Probability Option that has paid its premium in full shall post no initial margin for it. Initial margin should be held so that it is not available to the holder’s creditors on the holder’s insolvency, consistent with the credit support document.

13. Close-out under the 2002 ISDA Master Agreement

A perpetual has no maturity to value to, and its value can change by its whole notional in one Determination. A close-out that ignores this hands one party a windfall or leaves it holding an open jump. And the default-management devices of perpetual venues — auto-deleveraging, socialised losses, mutualised funds — would, if read in, take value from a party that did nothing wrong.

13.1These Definitions shall not amend Section 6 of the Master Agreement. Where an Early Termination Date is designated, the Close-out Amount shall be determined under the Master Agreement, and the clauses of this Section state what a commercially reasonable determination of it should take into account for a Transaction under these Definitions.
13.2For an Event Perpetual whose Underlying Event Contracts have not been Determined, the Close-out Amount should reflect Quantity × Contract Multiplier × (V − R), where V is the Probability Index at the Early Termination Date, or the Mark Price if the Confirmation so elects, and R is the reference level for variation margin; Funding Amounts accrued and unpaid should be treated as Unpaid Amounts.
13.3Where the Early Termination Date falls within the Resolution Zone, the Determining Party may reflect the cost of replacing a position exposed to an imminent jump, using quotations from Reference Dealers, and shall document the basis. Where the Resolution Source has published the fact on which an Outcome will be Determined, V should be the Final Settlement Value that publication implies.
13.4The parties may elect that a Close-out Amount determined before a pending Determination be adjusted once the Determination is final. Absent that election the Close-out Amount shall be final as the Master Agreement provides.
13.5Where an Underlying Event Contract has been finally Determined or Void before the Early Termination Date, the Final Settlement Amount, or the settlement on the Void Settlement Basis, shall be used in place of any index value.
13.6A Probability Option shall be valued for Close-out with a Bounded-Support Model under Section 11. Where an Index Disruption is in effect on the Early Termination Date, the Determining Party shall use the value held or determined under Section 4 and shall document its basis.
13.7No auto-deleveraging, socialised loss, mutualisation, or deduction from any insurance or default fund shall apply to a Transaction unless both parties expressly elect it in the Confirmation and state its terms in full.
13.8The parties may elect Bilateral Default Management: (a) a substitute counterparty, under which the defaulting party’s Transactions may be novated to a substitute named in the Confirmation or chosen by a procedure stated in it, at a price determined as for the Close-out Amount, only with the non-defaulting party’s consent given at the time; or (b) third-party protection, such as a guarantee or pre-funded protection, whose provider and cost-bearer shall be disclosed in the Confirmation.
13.9Bilateral Default Management shall be disclosed and consensual, and shall never be compelled: no party shall be required to accept a substitute counterparty, contribute to another party’s loss, or have its position reduced because of another party’s default, and no election shall limit the non-defaulting party’s rights under Section 6 of the Master Agreement.

14. Calculation Agent, determinations and restricted persons

Every number in an event perpetual — index, mark, funding, settlement value — passes through the Calculation Agent. A Calculation Agent that is also a counterparty and answers to nobody can move each of them in its own favour; a person who can influence an input or a Resolution Source can do the same from outside.

14.1The Confirmation shall name the Calculation Agent. If none is named, both parties shall act jointly as Calculation Agent, and any disagreement between them shall be decided under the dispute route of the Underlying Event Contract.
14.2The Calculation Agent shall act in good faith and in a commercially reasonable manner, shall apply the stated method without discretion wherever the method gives an answer, and shall give written reasons for any determination that involves discretion.
14.3The Calculation Agent shall maintain a written methodology for the Probability Index, Mark Price, funding, rolls and fallbacks sufficient for an independent party to reproduce every published value from its inputs, and shall provide it to each party before the trade date.
14.4The Calculation Agent shall retain every input, exclusion and calculated value for at least five years and shall provide them to either party within five Local Business Days of a request.
14.5Where the Calculation Agent is a party or an Affiliate of a party, that fact shall be stated in the Confirmation, the other party may require any determination to be reviewed under the dispute route, and the Calculation Agent should separate the staff who calculate the Probability Index and Mark Price from those who trade.
14.6No Determination of whether, or to what extent, an event occurred shall be made under these Definitions; every such Determination shall be made under the ECS route for the Underlying Event Contract, ending where the Fallback Waterfall provides in a Determinations Committee or Void.
14.7Restricted Persons under the ECS Definitions; anyone able to influence a Resolution Source; anyone able to influence the Probability Index other than by submitting their own firm quotes, including those who operate the matching or surveillance of a Reference Venue; anyone who calculates the Probability Index or Mark Price; and members of a Determinations Committee to which the event may be referred, shall not hold a position in any Transaction referencing that Underlying Event Contract.
14.8A Reference Dealer holding a position referencing the Underlying Event Contract may contribute Eligible Inputs only within the Contributor Share Cap, and shall not submit a quote it is not prepared to execute.
14.9Each party shall represent, at the trade date and at each increase in Quantity, that it is not a Restricted Person in respect of any Underlying Event Contract the Transaction references. The Confirmation should treat a breach of that representation as an Additional Termination Event with the breaching party as the sole Affected Party.
14.10The Calculation Agent shall report to both parties, and to any Determinations Committee to which the event is referred, any input it has reason to believe was submitted to influence the Probability Index, and may exclude that input with written reasons.

15. Event Perpetual Identifier and reporting

With no central book, the only way to add up exposure to one event perpetual across dealers and counterparties is to give the same economic terms the same name. The identifier is derived, not assigned, so no registry, licence or service is needed to issue it, and two firms computing it independently reach the same answer.

15.1The Event Perpetual Identifier shall be “EPI1-” followed by the first sixteen Crockford base-32 characters of the SHA-256 digest of the canonical economic terms, in four groups of four separated by hyphens — the same digest and encoding as the ECI under Part F of the ECS.
15.2The canonical economic terms shall comprise: the archetype; for each Underlying Event Contract its ECI, Referenced Outcome and role (single, target, conditioning, leg A, leg B or constituent with its weight); the Event Series rule; the Contract Multiplier and settlement currency; the index method — the Reference Venues and Reference Dealers, aggregation, index window, calculation interval, Staleness Limit, minimum inputs, Contributor Share Cap, outlier threshold and maximum spread; the Mark Price method and Mark Band; the funding form, Funding Interval, Funding Cap, Resolution Zone funding cap, Interest Component and Probability Floor; the Resolution Zone Threshold and Pre-Resolution Window; the Interim Settlement Percentage, Void Settlement Basis and any fixed void value; the roll mode and roll window; the variance sampling interval, window and increment cap; and for a Probability Option its type, strike, expiry time, exercise style and reference.
15.3An election relied on by fallback shall be included at its fallback value. Counterparties, Trade Price, Quantity, the Calculation Agent, margin and collateral terms, Bilateral Default Management, documentation and the method of execution shall be excluded, so that the same economic terms carry the same identifier wherever and however they trade.
15.4The canonical form shall be a JSON object keyed by field path, with keys sorted by Unicode code point; strings NFC-normalised with internal whitespace collapsed; numbers as the shortest decimal string without exponent or trailing zeros; durations as ISO 8601 durations; and lists of sources sorted. A field shall be omitted only where it does not apply to the archetype.
15.5Any person may compute an Event Perpetual Identifier without registration. An identifier shall not imply that a Transaction conforms to these Definitions.
15.6Parties should represent Transactions in a form compatible with the ISDA Common Domain Model, qualifying each product by its archetype, using the ECI of each Underlying Event Contract as the underlier identifier, and carrying the Event Perpetual Identifier wherever a record has a field for it.
15.7As a non-binding proposal, a UPI taxonomy for event swaps should identify an underlier type of “event contract” referenced by ECI, an instrument type of swap for Event Perpetuals and option for Probability Options, and the archetype as the product’s return or payout attribute. This proposal shall not be read as determining any regulatory classification or reporting obligation.

16. Elections Table

Most disputes on perpetual contracts begin with a term nobody stated. Every election is listed here with the value that applies if the Confirmation is silent, so that a short confirmation is still a complete one — and so that a firm relying on a default has chosen it, not inherited it.

16.1Archetype (Section 3): no fallback applies. A Confirmation that does not state an archetype shall not document a Transaction under these Definitions.
16.2Underlying Event Contracts (Section 2): each ECI shall be stated and no fallback applies. Referenced Outcome: for a binary Outcome Set, the first-listed Outcome; otherwise no fallback. Spread and basket weights: no fallback.
16.3Contract Multiplier and settlement currency: if omitted, the payout per contract and the settlement currency of the Underlying Event Contract shall apply.
16.4Reference Venues and Reference Dealers (Section 4): if none is named, the Probability Index shall be determined at the end of each Funding Interval by a poll of at least three dealers chosen by the Calculation Agent, none an Affiliate of either party, and the Confirmation may not then be described as conforming to EPD-3.
16.5Index method (Section 4): if omitted, the median method shall apply with a calculation interval of PT1M, an index window of PT5M, a Staleness Limit of PT5M, a maximum spread of 0.10, a minimum of three Eligible Inputs, an outlier threshold of 0.10, a Contributor Share Cap of one third, a maximum hold period of PT1H and a maximum index postponement of P2D. Fallback Reference Dealers: as for an omitted Reference Dealer list.
16.6Mark Price (Section 5): if omitted, the Mark Price shall equal the Probability Index. Where a separate method is elected without a Mark Band, the Mark Band shall be 0.05.
16.7Funding (Section 6): if omitted, the Funding Interval shall be PT8H ending at 00:00, 08:00 and 16:00 UTC; the absolute form shall apply; the Funding Cap shall be 0.005 in the absolute form and 0.0075 in the relative form; the Resolution Zone funding cap shall be one half of the Funding Cap; the Interest Component shall be zero; the Probability Floor shall be 0.10; and Funding Amounts shall not be netted against variation margin.
16.8Resolution Zone (Section 7): if omitted, the Resolution Zone Threshold shall be 0.03, the Pre-Resolution Window P3D, and the intraday variation margin threshold 0.05.
16.9Settlement (Section 8): if omitted, the Funding Freeze Time shall be as stated in Section 8 with no earlier time; the Interim Settlement Percentage shall be zero; the Void Settlement Basis shall follow the void settlement of the Underlying Event Contract; and no interest shall be payable on a true-up.
16.10Rolls (Section 9): if omitted, the roll mode shall be roll-on-Determination, the roll window PT1H and the maximum roll postponement P5D. The Event Series and, for a Continuous Probability Perpetual, the horizon have no fallback.
16.11Conditional and variance terms (Section 10): if omitted, a Conditional Event Perpetual shall settle on an entry-price unwind if the Conditioning Event is not met and shall exchange variation margin while dormant; a Variance Event Perpetual shall use a trailing window of P30D, a sampling interval of PT1H, an increment cap of 0.10, and shall exclude the change caused by the Determination.
16.12Probability Options (Section 11): if omitted, exercise shall be European and automatic at expiry, and a binary option with S equal to K shall pay nothing.
16.13Margin (Section 12): if omitted, initial margin shall be the full Jump-to-Resolution Loss with a floor fraction of one (no confidence-model reduction), and additional initial margin shall be transferred within one Funding Interval. The credit support document has no fallback and shall be stated.
16.14Close-out (Section 13): if omitted, the Probability Index rather than the Mark Price shall be used, no post-Determination adjustment shall apply, and Bilateral Default Management shall not apply.
16.15Calculation Agent (Section 14): if omitted, both parties shall act jointly as Calculation Agent.

Conformance

A firm may state that it conforms only after an assessment by assessors independent of it, published with the result. The Institute does not assess firms itself, and Tomorrow’s claims are assessed on the same terms as everyone else’s.

EPD-1

Defined

The Confirmation incorporates these Definitions and the ECS Definitions, states an archetype and every election in the Elections Table or expressly accepts its fallback, and references Underlying Event Contracts each conforming at least to ECS-2. The funding formula, Final Settlement and Void Settlement Basis are fully specified, and no mutualisation or auto-deleveraging applies unless expressly elected. Within reach of any two counterparties with no external infrastructure.

EPD-2

Resolution-safe

Everything in EPD-1, plus: a Resolution Zone with a stated Resolution Zone Threshold and Pre-Resolution Window; initial margin of at least the Jump-to-Resolution Loss in the Resolution Zone; the absolute form of funding near the bounds; a Funding Freeze Time; a stated Interim Settlement Percentage and true-up; minimum-input, staleness and outlier rules for the Probability Index; and a Bounded-Support Model for every option valuation and close-out.

EPD-3

Governed

Everything in EPD-2, plus: each Underlying Event Contract conforms to ECS-3; the Calculation Agent is independent of both parties, or every discretionary determination is subject to independent review with published reasons; the index methodology is published; the Contributor Share Cap and restricted-person rules apply and are represented; records are kept as Section 14 requires; and the Event Perpetual Identifier is computed and carried in records and reports.

Open questions

Are the fallback values — a Resolution Zone Threshold of 0.03, a Pre-Resolution Window of three days, a Funding Cap of half a probability point per eight hours — the right defaults? Evidence from traded event perpetuals is invited.
Should the relative form of the Premium Component be permitted at all, given that the absolute form is well-behaved across the whole of [0, 1]?
Under an entry-price unwind on Void, should Funding Amounts already paid be reversed as well, so that the analogy with return of premium is complete?
Should the named Reference Venues and Reference Dealers form part of the Event Perpetual Identifier, or be treated as terms of business so that more trades share one identifier?
Should the jump at resolution be included in the realised variance of a Variance Event Perpetual by default, or excluded as proposed?
Is the Probability Floor the right lower limit for computing a conditional probability as a ratio, or should conditional perpetuals require direct quotes on a conditional contract?
Where an Early Termination Date falls between the Close Time and a final Determination, should a post-Determination adjustment of the Close-out Amount be the default rather than an election?
With a Contributor Share Cap of one third and a minimum of three inputs, every contributor is pivotal in a thin market. Is a higher minimum, or a lower cap, workable for the events these products reference?
Where should event swaps and probability options sit in the UPI taxonomy, and is the archetype the right attribute to distinguish them?

To comment, request to join. Members’ comments are answered on the record, with reasons for each change accepted or rejected.

History

Version 0.1.0 · 5 Oct 2026
First public draft. Seven perpetual archetypes and Probability Options on an ECS Event Contract; index construction, funding on a bounded underlying, the Resolution Zone, final settlement, rolls, jump-to-resolution margin, close-out under the 2002 ISDA Master Agreement, the Event Perpetual Identifier, an Elections Table with fallbacks, and three conformance tiers.