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PROFITING ON INEFFICIENCIES IN BETTING DERIVATIVE MARKETS: THE CASE OF UEFA EURO 2012

Dominic Cortis, Steve Hales, Frank Bezzina

Abstract


This paper investigates whether it is possible to profit from market inefficiencies on betting exchanges during short tournaments. We describe how a Monte Carlo simulation method, with an inbuilt noise parameter applied on '1X2' markets, can be used to determine odds for derivative markets. In cases of mismatch between model and market odds, a modified Kelly strategy is proposed to determine the percentage of own funds placed against the market. When this proposal is applied to the UEFA European Nations association football tournament 2012, two important findings emerge: (a) a profit of circa 12% of allocated funds was generated, and (b) the profit is not contingent on the noise parameter, thus indicating the possibility of arbitrage between different betting markets. The proposed method can be extended to other sports provided the competition consists of a group stage held over a short period of time.

Keywords


Euro 2012, Arbitrage, Betting, Monte Carlo, Betfair, Modeling

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References


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DOI: http://dx.doi.org/10.5750/jgbe.v7i1.597

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