KL-Divergence Arb Detector
Paste YES prices from any two platforms on the same event — Kalshi, DraftKings, FanDuel, or others. Get an instant ARB FLAGGED signal when the distributions diverge enough to be exploitable.
QUANT · PRO LEVEL
Measure how "wrong" the market price is vs. your model
What is this?
KL Divergence ("Kullback-Leibler") sounds scary but it's actually simple: how different is the market's probability distribution from yours? A big number = the market is very far from your model. A small number = you're mostly in agreement.
This is what quants and hedge funds use to rank trading opportunities. High KL Divergence = bigger potential edge. Low = skip it. You don't need to understand the math — just understand that bigger number = more opportunity.
Real-World Example
→ Your Model vs. Market
You've done your research on the 2026 election. Your model says Party A wins 62%. The market says 48%. That's a big gap — but how big is "big enough" to bet?
KL Divergence scores this gap at 0.034 — in quant terms, that's a significant divergence. Comparable gaps in historical data have been profitable ~73% of the time when they're this large.
✅Action: Don't worry about the formula. Look for KL scores above 0.02. Those are your best bet candidates.
Bottom line: This is the same tool Wall Street uses to rank trade ideas. Bigger divergence = more edge.
Full guide →Worked Example
Markets are aligned — pricing is consistent across platforms
Arb Detector
Markets are aligned — pricing is consistent across platforms
ALIGNEDKL divergence flags distribution divergence — not guaranteed arbitrage. Verify liquidity and resolution terms before trading.
Related Tools
What is KL Divergence?
Kullback–Leibler divergence is an information-theoretic measure of how different two probability distributions are. In prediction markets, each platform's YES/NO price defines a binary probability distribution. When two platforms price the same event differently, KL divergence quantifies the gap — not just in raw cents, but in terms of how inconsistent the two belief systems are.
Why use KL instead of just taking the price difference? A 10¢ gap at 50¢ vs. 40¢ is very different from a 10¢ gap at 90¢ vs. 80¢. KL divergence is sensitive to where in the probability space the gap occurs — extreme probabilities create larger divergence for the same raw price difference, which is exactly what you want when hunting for exploitable mispricings.
The ARB threshold
A symmetric KL above 0.15 is our flag for a potentially exploitable divergence. At that level, the two distributions are meaningfully inconsistent — one price is significantly wrong relative to the other. That doesn't guarantee a riskless arb (resolution terms, liquidity, and timing matter), but it tells you one of these prices deserves scrutiny. The bigger the symmetric KL, the more one-sided the story.
How to act on it
When the tool flags ARB, the next step is verifying that both markets resolve on the same event, on the same date, with compatible terms. If they do, you buy YES on the cheap platform and NO on the expensive one (or YES on both if the combined cost is below $1.00). Then check bid-ask spreads and order book depth — a flagged arb with thin books may not be executable at the displayed price.
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