Dynamic Learning and Market Making in Spread Betting Markets with Informed Bettors

2021 ◽  
Author(s):  
John R. Birge ◽  
Yifan Feng ◽  
N. Bora Keskin ◽  
Adam Schultz
Keyword(s):  
Information Asymmetry ◽  
Sports Betting ◽  
The Other ◽  
Market Maker ◽  
Market Manipulation ◽  
Dynamic Learning ◽  
Market Making ◽  
Betting Markets

How Bookies Can Outwit Sophisticated Bettors Sports-betting markets are based entirely on predictions. A bettor has to pick a winning contestant, and a market maker―a bookie―bets on the opponent. As bookies have to take the other side of every bet, it is of great value to understand the market making problem, that is, how to set the spread lines as “prices” for the bookies. Nevertheless, understanding of this problem is limited. Specifically, sophisticated bettors exist in the market, and a bookie can be manipulated by skillful bettors because of information asymmetry. In “Dynamic Learning and Market Making in Spread Betting Markets with Informed Bettors,” Birge, Feng, Keskin, and Schultz study the market-making problem under information asymmetry and market manipulation. They show that, although many popular learning and pricing algorithms, such as Bayesian policies, are effective in learning, they are vulnerable to strategic manipulations. The authors propose a dynamic learning and pricing algorithm, called the inertial policy, that collects information from the market effectively but also protects the bookie from strategic manipulations.

ARE BEHAVIORAL BIASES CONSISTENT ACROSS THE ATLANTIC?: THE OVER/UNDER MARKET FOR EUROPEAN SOCCER

2013 ◽  
Vol 3 (2) ◽  
pp. 89-101
Author(s):  
Andy Weinbach ◽  
Rodney J. Paul
Keyword(s):  
Financial Market ◽  
North American ◽  
Sports Betting ◽  
The Other ◽  
Behavioral Biases ◽  
Simple Strategy ◽  
Betting Markets ◽  
European Football

Tests of the totals (Over/Under) market are performed for 22 European Soccer Leagues to determine if the behavioral biases found in North American sports betting markets are present in European Football (Soccer) betting markets.  Even though European fans passionately follow a low-scoring sport, bettors/fans in this market still appear to prefer the over to the under.  Simple betting strategies based on betting the over lose more than twice as much money as a simple strategy of betting the under and returns are found to be statistically different from a fair bet.  In addition, when the over is the longshot, a favorite-longshot bias is found such that losses on the over are extremely high.  When the under is the longshot, however, losses are nearly equal between overs and unders.  This presents the possibility multiple behavioral biases may exist in the same financial market, with the presence of one possibly masking the other.

Dynamic Learning and Market Making in Spread Betting Markets With Informed Bettors

2018 ◽  
Author(s):  
John R. Birge ◽  
Yifan Feng ◽  
N. Bora Keskin ◽  
Adam Schultz
Keyword(s):  
Dynamic Learning ◽  
Market Making ◽  
Betting Markets

scholarly journals The affective economy of transnational surrogacy

2018 ◽  
Vol 50 (8) ◽  
pp. 1626-1645 ◽  
Author(s):  
Carolin Schurr ◽  
Elisabeth Militz
Keyword(s):  
Economic Sociology ◽  
Global South ◽  
The Other ◽  
Market Making ◽  
Ethnographic Fieldwork ◽  
Final Good ◽  
Multiple Processes ◽  
Maternal Bond ◽  
Effective Organization ◽  
Global Surrogacy

The booming business of global surrogacy has come to a halt: one surrogacy hub after the other has started to regulate the incremental flow of intended parents to the Global South hoping to fulfill their desire for a baby with the help of a foreign surrogate laborer. Thailand and Nepal have banned surrogacy altogether; India and Mexico insist on the altruistic nature of their surrogacy arrangements. As the drive for altruistic surrogacy suggests, the baby holds an exceptional position in many societies: ideas about the ‘unique’ maternal bond create public unease about the commercialization of babies in surrogacy markets. Drawing on economic sociology and theories of affect, this paper argues that multiple processes of affective attachment, detachment and reattachment shape transnational surrogacy journeys. Based on ethnographic fieldwork in Mexico’s surrogacy industry, the paper studies processes of commodification and decommodification in three instances of market-making: (1) the assignment of value and a price to reproductive laborers’ bodies on the basis of affective postcolonial geographies of beauty; (2) the affective/effective organization of the market encounter through contracts and communication rules and (3) the detachment of the final ‘good’ of the baby from the surrogate laborer. Transnational surrogacy arrangements, the paper concludes, are always forms of partial commodification – no matter whether they are framed as altruistic or commercial – because processes of affective/effective attachment and detachment are fundamental for delineating the intimate boundaries of families that come into life with the assistance of the globally operating surrogacy industry.

Sports Betting and The Black-Litterman Model: A New Portfolio-Management Perspective

2021 ◽  
Vol 16 (4) ◽  
Author(s):  
Isabel Abinzano ◽  
Maria Jesus Campion ◽  
Luis Muga ◽  
Armajac Raventós-Pujol
Keyword(s):  
Portfolio Management ◽  
Sports Betting ◽  
Google Trends ◽  
Management Model ◽  
Market Prices ◽  
Management Models ◽  
Management Perspective ◽  
Portfolio Manager ◽  
Betting Markets

This paper transfers and adapts the Black-Litterman portfolio management model and its subsequent generalizations to the characteristics and specificities of assets quoted on sports betting markets. The results show that these assets are suitable for the application of portfolio management models with the possible inclusion of investors’ opinions. Information based on the variability of market prices and the attention received by NBA teams in Google Trends is successfully used to simulate the opinions expressed by a hypothetical portfolio manager. Furthermore, the assets are suitable for inclusion in portfolios in which managers are seeking returns uncorrelated with other assets.

scholarly journals Betting, Selection, and Luck: A Long-Run Analysis of Repeated Betting Markets

Entropy ◽  
2019 ◽  
Vol 21 (6) ◽  
pp. 585 ◽  
Author(s):  
Giulio Bottazzi ◽  
Daniele Giachini
Keyword(s):  
Relative Risk ◽  
The Other ◽  
Risk Averse ◽  
Quantal Response ◽  
Two Agents ◽  
Long Run ◽  
Binary Event ◽  
Betting Market ◽  
Betting Markets ◽  
The Difference

We consider a repeated betting market populated by two agents who wage on a binary event according to generic betting strategies. We derive new simple criteria, based on the difference of relative entropies, to establish the relative wealth of the two agents in the long-run. Little information about agents’ behavior is needed to apply the criteria: it is sufficient to know the odds traders believe fair and how much they would bet when the odds are equal to the ones the other agent believes fair. Using our criteria, we show that for a large class of betting strategies, it is generically possible that the ultimate winner is only decided by luck. As an example, we apply our conditions to the case of Constant Relative Risk Averse (CRRA) and quantal response betting.

scholarly journals MARKET MAKING WITH ALPHA SIGNALS

2020 ◽  
Vol 23 (03) ◽  
pp. 2050016
Author(s):  
ÁLVARO CARTEA ◽  
YIXUAN WANG
Keyword(s):  
High Frequency ◽  
High Frequency Data ◽  
Model Parameters ◽  
Market Maker ◽  
Electronic Market ◽  
Market Making ◽  
Liquidity Provision ◽  
Limit Orders ◽  
Adverse Selection Costs ◽  
Downward Pressure

We show how a market maker employs information about the momentum in the price of the asset (i.e. alpha signal) to make decisions in their liquidity provision strategy in an order-driven electronic market. The momentum in the midprice of the asset depends on the execution of liquidity taking orders and the arrival of news. Buy market orders (MOs) exert a short-lived upward pressure on the midprice, whereas sell MOs exert a short-lived downward pressure on the midprice. We employ Nasdaq high-frequency data to estimate model parameters and to illustrate the performance of the market making strategy. The market maker employs the alpha signal to minimise adverse selection costs, execute directional trades in anticipation of price changes, and to manage inventory risk. As the market maker increases their tolerance to inventory risk, the expected profits that stem from the alpha signal increase because the strategy employs more speculative MOs and performs more roundtrip trades with limit orders.

AN EXAMINATION OF IN-PLAY SPORTS BETTING USING ONE-DAY CRICKET MATCHES

2012 ◽  
Vol 1 (2) ◽  
pp. 93-109
Author(s):  
Steve Easton ◽  
Katherine Uylangco
Keyword(s):  
Financial Markets ◽  
Psychological Factors ◽  
Predictive Ability ◽  
Sports Betting ◽  
Bad News ◽  
Good News ◽  
Informational Efficiency ◽  
Betting Market ◽  
Betting Markets ◽  
Betting Odds

There is a wide literature on sports betting markets, a literature that examines the informational efficiency of these markets and uses them as laboratories to test for possible impacts of psychological factors on financial markets. The innovation of this study is the examination of price behaviour in an in-play betting market – namely that for one-day cricket. Cricket provides an ideal construct in which to examine in-play market behaviour, as it is a sport where outcomes can be calibrated as good news or bad news on a play-by-play basis. The results from an examination of over 8000 balls corresponding to over 8000 “news events” shows that the in-play betting market is one in which news is impounded rapidly into betting odds. There is also evidence that odds have a level of predictive ability with respect to outcomes from balls before they are bowled. Further, there is evidence of a drift in odds subsequent to the outcome of balls being known.

HOME BIAS AND INTERNATIONAL BETTING MARKETS: CAN INSTITUTIONAL CONSTRAINTS AND BEHAVIORAL BIASES LEAD TO ARBITRAGE PROFITS?

2013 ◽  
Vol 4 (3) ◽  
pp. 20-30
Author(s):  
Ludwig Chincarini ◽  
Christina Contreras
Keyword(s):  
Home Country ◽  
Home Bias ◽  
Sports Betting ◽  
Institutional Constraints ◽  
Small Data ◽  
Bias Effect ◽  
Data Set ◽  
Small Data Set ◽  
Betting Markets ◽  
European Football

The international sports betting markets are becoming more global, but there is still a large concentration of local bettors in gambling markets of individual countries. Home loyalty and other patterns of human behavior might lead to odds for international competitions being different in different countries with less favorable odds being quoted in the home country; the home bias effect. In this paper we explain the logic of this phenomena and examine a small data set to show the existence of the bias in three different sports: tennis, golf, and European football. We also suggest ideas for a more thorough investigation of the home bias phenomenon.

REVISITING THE “HOT HAND” HYPOTHESIS IN THE NBA BETTING MARKET USING ACTUAL SPORTSBOOK BETTING PERCENTAGES ON FAVORITES AND UNDERDOGS

2013 ◽  
Vol 5 (2) ◽  
pp. 42-56 ◽  
Author(s):  
Rodney J Paul ◽  
Andrew P Weinbach ◽  
Brad Humphreys
Keyword(s):  
Regression Models ◽  
Sports Betting ◽  
Least Squares Regression ◽  
Professional Basketball ◽  
The Public ◽  
Behavioral Bias ◽  
Hot Hand ◽  
Betting Market ◽  
Closing Price ◽  
Betting Markets

The “hot hand” hypothesis was first investigated in sports betting markets by Camerer (1989) and Brown and Sauer (1993), who examined if professional basketball teams truly could become “hot”, implying a change in their actual skill level, and if the betting market believes teams become “hot” and over bet the teams on winning streaks.   Both assumed that book makers operated a balanced book.  Recent evidence suggests that book makers do not set point spreads to balance betting on either side of games.  Book makers may price as a forecast or shade point spreads to exploit known biases.  The “hot hand” could exist, but closing point spreads may not reflect this bias due to an unbalanced book.   Using a 6 season sample of NBA betting market data, we show wagering against the “hot hand” does not win more than implied by efficiency.  However, OLS and two-stage least squares regression models show that bettors believe in the hot hand, as teams on streaks attract a significantly higher number of bets.  This illustrates that the public believes in the hot hand, reflecting an actual behavioral bias.  This bias exists even though the closing price serves as an optimal and unbiased forecast of outcomes.

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