Castle Event Hedge Workbench | Commercial Prediction Market Hedging

Hedge Contract Structuring

Model binary risk events, implied odds, and capital requirements.

Operating Entity Name

External Risk Event Exposure

Target Resolution Date

Potential Downside Impact ($)

Contract Protection Payout Target ($)

Implied Event Probability (Market Pricing) 10%

1% (100:1) 25% (4:1) 50% (2:1) 90% (1.1:1)

Calculated Premium Paid ($) Auto-derived from Kalshi binary market odds ($0.10/share = $50k for $500k payout).

Hedge Coverage

100%

Full downside covered

Implied Odds

10:1 payout ratio

$0.10 / contract share

Net Downside (No Hedge)

-$500,000

100% operational loss

Net Downside (With Hedge)

-$50,000 (premium only)

Loss capped at premium

Net Cash Flow Trajectory vs. Adverse Severity

Visualizing operational cash flow under binary adverse resolution vs. favorable outcome.

Unhedged Impact

Hedged with Castle

Resolution Audit Matrix

Resolution Scenario	Probability	Unhedged Cash Flow	Hedge Payout	Hedged Net Position	Capital Protected

How Tim Arrowsmith Hedged the "Unhedgeable"

When northern California altered the herder wage standard, Tim Arrowsmith faced an existential $500,000 cost shock to his 8-herder wildfire fuel reduction business. In standard commercial insurance, legislative wage changes are an excluded uninsurable risk. Through Castle Technologies, Kalshi, and institutional liquidity from Susquehanna, Tim locked in a 10:1 binary contract: risk $50k to protect $500k. If the legislature fixed the rule by Sept 30, he forfeited only the $50k fee; if not, the $500,000 payout preserved his business intact.