Election predictions are arbitrage-free: response to Taleb

Abstract

Taleb (2018) claimed a novel approach to evaluating the quality of probabilistic election forecasts via no-arbitrage pricing techniques and argued that popular forecasts of the 2016 U.S. Presidential election had violated arbitrage boundaries. We show that under mild assumptions all such political forecasts are arbitrage-free and that the heuristic that Taleb's argument was based on is false.