Feature requests for extreme probabilities

There are a number of features that Manifold could implement that would improve the accuracy of markets at relatively extreme probabilities (approximately, > 95% certainty). This bounty is a place to collect my notes on them. Bounty awards start at M500 for relevant suggestions, or M5000 for accepted pull requests that implement them. If you'd prefer payment in some non-Mana currency, please let me know in advance. Proposals and requests for larger bounty awards are welcome. (This bounty is underfunded; I'll add more as needed. Contributions welcome.)

I believe there are multiple related causes, all of them tractable if difficult to fix in their entirety. First and foremost, this is an interest rate and capital costs problem. Manifold's loan program is an excellent start in this direction, as it allows users betting on the "expected" side of a lopsided market to not tie up their capital for the entire duration of the market.

Further increases in the loan rate beyond 4%/day would help more. However, they come with increasing risks to Manifold from holders of large loans potentially defaulting, or large numbers of small users (likely new ones, attracted by a popular market) becoming over-leveraged on individual markets. So, a feature request: higher loan rates for well-diversified users, or other methods of risk management on faster loans.

Similarly, many of the markets of interest take the form of "will an event happen by a time", and the expected market behavior is for the likelihood to decay over time as the event continues to not happen. This means that people betting the event won't happen are making a profit, but they do not get that profit loaned back as they would with their initial investment. Paying out loans on unrealized gains also has risks, especially if there is no symmetric requirement to repay unrealized losses.

The interest rate problem also shows up in places where capital requirements exceed what they need to be, in that a user is required to tie up more capital than they can possibly lose. For example, when holding multiple No positions on a multiple choice market, or when the markets are logically dependent.

There are also a few minor obvious ones, such as being able to bet more precisely in extreme cases. Restricting probabilities to integer % values in ordinary ranges is bad, but low impact; at extreme ranges there is a meaningful difference between (say) 2.5% and 2%, or 2% and 1%. At least by the time you get to < 3% or > 97%, finer gradations of probability should be available, including values more extreme than 1%. There is a reasonable case that these should often be displayed as "< 1%" or similar in order to avoid presenting misleading claims of precision, but the actual value should be available and it should be possible to set limit orders at these values (especially important for arb bots).

I'll continue adding to this list over time.

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