Extending the price constraints of betting markets

Axén, Gustav; Cortis, Dominic

doi:10.1016/j.jbef.2019.07.001

Cited by 3 publications

(2 citation statements)

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“…A bettor wishing to hedge the risk of Leicester winning could bet with a bookmaker on all the other teams that could still mathematically win the league. The odds on each team winning will vary, but there will always be a bet size for each contender which will guarantee a sure amount no matter what happens -a perfect "dutching" hedge (Axén & Cortis, 2019). A simpler alternative is to use a betting exchange, where bettors trade amongst themselves and the exchange takes a percentage commission (Cortis & Briguglio, 2017).…”

Section: Opportunities To Hedgementioning

confidence: 99%

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High-stakes hedges are misunderstood too. A commentary on: “Valuing bets and hedges: Implications for the construct of risk preference”

Newall

Cortis

2019

Judgm. decis. mak.

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Frederick, Levis, Malliaris & Meyer (2018) report a package of laboratory studies where participants underestimate the value of “hedges”: Risky bets which cancel out the risk of another presently-held bet. However, it might be questioned to what extent laboratory findings predict field behavior. People might better understand hedges when more money is at stake, or when they have more time to reflect. We discuss three gamblers who, instead of hedging, used a costly “cash-out” option to eliminate the risk of their bets on Leicester FC’s improbable victory in the 2015/2016 English Premier League soccer season. The decision to cash-out rather than to hedge led to individual losses of up to £8,000, and did not seem plausibly explained by rational economic factors. High-stakes hedges are misunderstood too.

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Section: Opportunities To Hedgementioning

confidence: 99%

“…We call this approach a lay-hedge for the sake of simplicity. A lay bet can be used to hedge the risk of Leicester winning, and calculation of the correct bet size will guarantee a sure amount no matter what happens (Axén & Cortis, 2019).…”

Section: Opportunities To Hedgementioning

confidence: 99%

High-stakes hedges are misunderstood too. A commentary on: “Valuing bets and hedges: Implications for the construct of risk preference”

Newall

Cortis

2019

Judgm. decis. mak.

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Structural characteristics of fixed-odds sports betting products

Newall

Russell

Hing

2021

JBA

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Background and aimsA literature exists on the structural characteristics of electronic gambling machines (EGMs), which are design innovations that can promote spending excessive time and money on these games. Fixed-odds sports betting products, where bettors place sports bets against a bookmaker, have also seen significant innovations in recent years. Despite some differences between these gambling products, similar structural characteristics could also be relevant to sports betting. The aim was to review previous research on contemporary fixed-odds sports betting products, and to identify whether structural characteristics from the EGM literature are also relevant to sports betting.MethodsStructural characteristics uncovered by two influential reviews of EGMs were identified, and their relevance to fixed-odds sports betting products discussed via a narrative review.ResultsStructural characteristics of payout interval and potential betting frequency (in-play betting), multiplier potential (accumulators, complex bets, multis), win probability and payout ratio (all bets), bettor involvement (custom sports betting products, cash out), skill required (all bets), and near-misses (accumulators, complex bets, multis) were all identified in modern fixed-odds sports betting products.Discussion and conclusionsFixed-odds sports betting products have increasingly incorporated structural characteristics previously found in EGMs. Future research could further assess the extent to which these structural characteristics contribute to fixed-odds sports bettors spending excessive amounts of time and money while betting. These findings can help guide further sports betting research, contribute to an improved understanding of the potential universality of gambling product design, and inform policy.

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Hedging on Betting Markets

Axén¹,

Cortis

2020

Risks

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The possibility to use hedging strategies is an often neglected aspect in the literature on prediction/betting markets, as most papers assume that bettors will bet according to their beliefs about the probability of the outcome of the event, as opposed to the direction in which the odds will move. This ignores strategies that try to buy low and sell high through exploiting price changes, which is an important aspect to incorporate to fully understand market pricing. In this paper, we derive the key mathematical results in using hedging strategies through taking opposite positions to an initial bet after the market odds have changed and show that a profit can be made without explicitly speculating on the probability of the outcomes. We also discuss two sources of inefficiency that can arise when using hedging strategies in practice: (i) the need to pay a fee when using a betting exchange and (ii) the lack of a lay option (the possibility to bet against outcomes) on some markets, and we analyze how they affect the possibilities to hedge. Many of the results have interesting properties when expressed in terms of the naive probabilities implied by the odds.

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Extending the price constraints of betting markets

Cited by 3 publications

References 13 publications

High-stakes hedges are misunderstood too. A commentary on: “Valuing bets and hedges: Implications for the construct of risk preference”

High-stakes hedges are misunderstood too. A commentary on: “Valuing bets and hedges: Implications for the construct of risk preference”

Structural characteristics of fixed-odds sports betting products

Hedging on Betting Markets

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