Next Article in Journal
Modelling Australian Dollar Volatility at Multiple Horizons with High-Frequency Data
Next Article in Special Issue
Are Sports Bettors Biased toward Longshots, Favorites, or Both? A Literature Review
Previous Article in Journal / Special Issue
Comparison of Home Advantage in European Football Leagues
Open AccessFeature PaperArticle

Hedging on Betting Markets

Private Practice, 117 37 Stockholm, Sweden
Department of Insurance, FEMA, University of Malta, Msida, 2080 MSD, Malta
Author to whom correspondence should be addressed.
Risks 2020, 8(3), 88;
Received: 3 July 2020 / Revised: 27 July 2020 / Accepted: 29 July 2020 / Published: 25 August 2020
(This article belongs to the Special Issue Risks in Gambling)
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. View Full-Text
Keywords: betting markets; Dutching; hedging; betting exchange; betting risk; cash out; lay odds; odds; betting betting markets; Dutching; hedging; betting exchange; betting risk; cash out; lay odds; odds; betting
MDPI and ACS Style

Axén, G.; Cortis, D. Hedging on Betting Markets. Risks 2020, 8, 88.

AMA Style

Axén G, Cortis D. Hedging on Betting Markets. Risks. 2020; 8(3):88.

Chicago/Turabian Style

Axén, Gustav; Cortis, Dominic. 2020. "Hedging on Betting Markets" Risks 8, no. 3: 88.

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

Search more from Scilit
Back to TopTop