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A mathematical approach to the theory of bookmaking

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dc.contributor.advisor Manas GJ en
dc.contributor.author Symanowitz G en
dc.date.accessioned 2016-09-22T11:14:13Z
dc.date.available 2016-09-22T11:14:13Z
dc.date.created 1999 en
dc.date.submitted 2005 en
dc.identifier.uri http://hdl.handle.net/20.500.11892/106379
dc.description.abstract This work examines various aspects of bookmaking practice from a mathematical point of view. There are three broad themes:<br><br> 1. An examination of betting prices for both fixed odds and a relatively new form of betting known as spread betting (which is the application of financial futures trading to the sports betting markets)<br> i The advantage that the bookmaker builds into bis prices (fixed odds and spread betting) is discussed in some detail. The research examines and attempts to explain how bookmakers' odds are set in practice, based on a large data-set, and in the context of a model of judgement under uncertainty known as support theory.<br> ii The bookmaker's problem of determining suitable bid and offer prices for spread bets is addressed, and this is extended to the pricing of a sporting option (the sports betting equivalent of an options contract on a financial asset), and other betting instruments which limit the punter's risk.<br><br> 2. The modeling of betting behaviour<br> i A descriptive model of betting behaviour (for both fixed odds and spread betting) is proposed, based on Cumulative Prospect Theory. The model V provides a far more realistic account of gambling behaviour than traditional approaches.<br> ii The fixed odds betting model is extended into the stochastic domain to allow for random variation in the punter's bets. An empirical study allows for the estimation of the parameters of the underlying stochastic distribution and preference functionals of a representative racetrack punter. For individual punters, a maximum likelihood procedure is suggested, based on a historical record of prior bets placed by that punter.<br><br> 3. Bookmaker pricing models<br> The proposed betting model allows the bookmaker to predict the likely reaction of punters to the betting prices offered, given a suitable probability distribution describing each punter's subjective beliefs. The determination of optimal fixed odds prices is considered for two different bookmaker's objectives:<br> i the maximization of expected profits<br> ii the balancing of books, where the bookmaker expects to earn a fixed risk-free profit regardless of the outcome of the sporting contest. en
dc.language English en
dc.title A mathematical approach to the theory of bookmaking en
dc.type Doctoral degree en
dc.description.degree PhD (Science) en

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