Betting market: analysis of arbitrage situations
- PDF / 112,199 Bytes
- 9 Pages / 595.276 x 793.701 pts Page_size
- 117 Downloads / 237 Views
BETTING MARKET: ANALYSIS OF ARBITRAGE SITUATIONS V. Yu. Kotlyara and O. V. Smyrnova b
UDC 519.2; 339.1
Abstract. An arbitrage practice and its various applications to the betting market are considered. The ratio of profit and commitments and brake-even value of the market are proved. The concepts of speculative and systematic probabilities, conditional profit and conditional loss from a market event, and the efficiency of game strategies are analyzed. A typical two-position model of trading at an exchange is considered. Keywords: betting market, arbitrage, probability, betting, trading model.
The betting market (BM) is a rapidly developing financial market. Though it is yet behind the stock market or FOREX in trade volume, the momentum it has gained is impressive. Nowadays, the BM is formed by hundreds of bookmakers and exchanges. The Sportsbookreview rating includes over 500 sportsbooks (their annual turnover in England is above 14 billion GBP). A demonstrative example is the Betfair on-line betting exchanges. The company was founded in 2000 and now has 4 million registered users worldwide (more than 7 million transactions daily, 7 billion visitors weekly, content in 17 languages, including Russian). The total value of its shares on the London stock exchange (LSE) in 2011 was estimated almost 1 billion GBP, and the gross revenue was 393.3 million GBP (http://corporate.betfair.com/). The company twice won Queen’s Award for Enterprise in the innovation and international-trade categories. Today, it is the most successful and revolutionary Internet project. Despite some similarity between the BM and the stock market, there are no domestic publications related to the subject of the present paper. Sports and other events with random outcome are accompanied by the issuance of original securities with market value reflected in their rate. However, a number of differences make the BM a unique financial structure in the modern economic world. Let us discuss the features that distinguish the BM from all other financial markets. 1. Pricing. Theoretically, to determine the price for a sports event in a betting line, it is necessary to estimate match-ups and analyze various probabilities of outcomes. The statistical and analytical information is used to derive so-called fair odds. Naturally, various analysts and, hence, bookmakers may have different opinions on the outcome of an event and the chances of the teams. The other pricing factors are addressed below. 2. Dynamism. Most events on the BM last for very short periods of time. There is hardly an issuer in the stock market who would issue a security with a maturity of 105 min (football match) or 5–7 min (race). 3. Arbitrage. A several-point arbitrage is considered a successful financial operation. For livers (Live or In-play traders), tens-of-percent arbs are an everyday reality. 4. Market coupling. The prices in many markets of one sports event are coupled, which determines their high correlation and allows various methods (correlation, regression, factor, etc. analysis)
Data Loading...
