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Is it me, or are derivatives used in sports?

Joined
6/6/08
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After watching the Eagles-Cowboys game today (you'd think it'd be a can't miss showdown...instead it was a can't miss comedy), I was thinking...

Making a bet on a team is sort of like buying a call...for instance, if you bet on a favored team, you pay a premium, which is your bet, your strike is whether or not your team wins, and your break even is how much they're favored by...

Does financial engineering have any place in sports? It seems to be statistics mania there (if you can separate the meaningful statistics from the noise), and is it possible to do create betting arbitrages in vegas?
 
i tried doing arbitrage in sports once , this was b4 i got in quant finance. ..its almost impossible tho. I tried all the different combinations especially when you have the option of multi betting where the odds are multiplied by each other to produce bigger odds..

its hard tho, if its 2 team playing and ur in a sport where a draw is unlikely such as nfl or rugby as opposed to soccer then they'll never pick odds where u can bet on both teams and still make a profit.

if you use betfair.com you can bet on teams losing when makes it more complicated (akin to going short or possibly buying put options)

I tried every single pair of combinations and none work, lol. I got no idea how they price those odds tho it must have something to do with efficient market hypthosis where the odds always change relative to the current information (that is new news)... same as stocks.

but I think arbitrage there is very possible especially theres also a large human aspect in sports betting, anything can happen which is probably more volatile..

one thing u can also compare

match fixing in sports is pretty much akin to insider trading......is it not???

hmmm have i sparked up some new potential job opportunities 4 quants...??? Quantitative Sports Analyst ?? soon be getting degree in Sports Engineering
 
I'm under the (mostly guesstimate) impression that there's a combination of statistical models and intrade-esque pre-bettting among the casinos (and perhaps a few favored customers) to get the initial line. Then the spread is updated based on bets in order to make sure exposure is limited and the vig is nice.

As for sports betting and financial engineering I think there's a definite relationship. For instance I'm also under the impression that Kelly's criterion was used as a money management tool by betters before it was briefly used by traders. Arbitrage anywhere eh.
 
Arbitrage is everywhere in the world of sportsbetting. However, there are special problems you need to deal with.

For example, arbitrages usually do not exist within sportsbooks; you have to utilize multiple sportsbooks to find them. However, the arbitrages are usually very thin (as expected), so you need to move large amounts of money around, but it is difficult to do this in the current environment. The environment itself is also constantly changing (due to legislation, company policy, etc) so you may run into problems, like sites freezing your account. Sportsbooks also like to discourage sharp bettors, and may offer you different lines or spreads than the typical punter sees.

Sportsbetting is also the only type of online gambling in the United States that is clearly illegal under federal law, due to the Wire Act. Most interpret the act to state that it is illegal to run an online sports book in the US, but not illegal to place bets. In either case, you are still giving your money to a company that is willingly breaking US federal law.

There is software available that finds arbitrages for you, and forums where people post information regarding them. Like in the markets, the arbitrages close-up as more action is placed on them.

A couple of years ago, at the kickoff of the 2006 NFL season, Mansion sports exchange offered a huge arbitrage. If you bet $1000 on the Steelers to cover the spread against the Dolphins, you received your $1000 back if the Steelers didn't cover, and $2000 back (minus the vigorish) if they covered. I knew many people who took this bet, then hedged it at a different book, thus locking in about $475. Others I knew didn't want to pay the extra rake, and didn't hedge. In the end, the steelers covered, and everyone went home happy (except Mansion).
 
Are the betting sites that smart that even their arbitrages are tiny?

-_-...

Well, that idea is grounded before ever taking off -_-...
 
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