> ## Documentation Index
> Fetch the complete documentation index at: https://dexbuilder.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# Negative Risk Markets

> Understand the Negative Risk mechanism for multi-outcome events and how outcome conversion can improve capital efficiency.

Negative Risk is a mechanism for multi-outcome events where only one outcome can ultimately win. It connects multiple Markets under the same Event through conversion relationships between outcomes, improving capital efficiency.

## How It Works

In a standard multi-outcome event, each Market is independent. If you want to express that a specific outcome will not happen, you would normally buy that Market's No Token, but that No Token has no asset-conversion relationship with the other outcomes.

Negative Risk creates that relationship:

* 1 No share from any Market can be converted into 1 Yes share in every other Market under the same Event.
* The conversion is performed through the Neg Risk Adapter contract.

### Example

Assume the Event is "Who will win the presidential election?" and it contains three outcomes:

| Outcome | Current Position |
| - | - |
| Candidate A | — |
| Candidate B | — |
| Other | 1 No |

Under Negative Risk, 1 No share of "Other" can be converted into:

| Outcome | After Conversion |
| - | - |
| Candidate A | 1 Yes |
| Candidate B | 1 Yes |
| Other | — |

Economically, being short one outcome can therefore be converted into being long all other outcomes.

## Augmented Negative Risk

Standard Negative Risk generally requires the complete set of outcomes to be known when the market is created. In real-world scenarios, however, new candidate outcomes may appear after trading begins, such as a new candidate entering an election.

Augmented Negative Risk handles these dynamic changes with the following outcome types:

| Outcome Type | Description |
| - | - |
| Named outcomes | Outcomes explicitly defined when the market is created |
| Placeholder outcomes | Reserved slots that can later be assigned to specific outcomes |
| Other | Captures outcomes that are not explicitly listed |

### How Placeholders Work

**1. Event Launches**

The Event launches with named outcomes, Placeholder outcomes, and Other.

**2. Assign a Placeholder**

When a new valid outcome appears, a Placeholder can be assigned to that outcome.

**3. Other Narrows**

As Placeholders are assigned, the remaining set represented by Other becomes narrower.

### Trading Rules

* If the final correct outcome was never explicitly named, the Market can settle to Other.
* The practical definition of Other changes as Placeholders are assigned, so traders should pay particular attention to its current scope when trading Other directly.

## Conversion Mechanism

The Neg Risk Adapter performs conversion atomically:

**1. Hold a No Token**

The user holds 1 No Token for Outcome A.

**2. Call convert**

Call the Adapter's `convert` method.

**3. Receive Yes Tokens for Other Outcomes**

The user receives 1 Yes Token for every other outcome under the same Event.

## Next Steps

> [card] [Markets & Events](https://dexbuilder.mintlify.site/en/event-contracts/markets-events.md)
>
> Learn how multi-Market Events are organized.

> [card] [Positions & Outcome Tokens](https://dexbuilder.mintlify.site/en/event-contracts/positions-tokens.md)
>
> Learn how outcome tokens relate to positions.


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