Optimal bookmaking

DOI10.1016/J.EJOR.2021.03.005MaRDI QIDQ2239899zbMATH OpenOpenAlexFDO

Authors Matthew Lorig, Zhou Zhou, Bin Zou

Publication date 5 November 2021

Published in European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1907.01056

zbMATH Keywords

Poisson processstochastic controlstochastic programmingutility maximizationsports betting

Mathematics Subject Classification ID

Portfolio theory (91G10) Stochastic programming (90C15) Optimal stochastic control (93E20)

Abstract: We introduce a general framework for continuous-time betting markets, in which a bookmaker can dynamically control the prices of bets on outcomes of random events. In turn, the prices set by the bookmaker affect the rate or intensity of bets placed by gamblers. The bookmaker seeks a price process that maximizes his expected (utility of) terminal wealth. We obtain explicit solutions or characterizations to the bookmaker's optimal bookmaking problem in various interesting models.

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Cited in

(8)

• Dynamic learning and market making in spread betting markets with informed bettors
• Evaluating betting odds and free coupons using desirability
• Optimal Strategies for Sports Betting Pools
• A cumulative prospect theory explanation of gamblers cashing-out
• Strategic trading with information acquisition and long-memory stochastic liquidity
• Risk-neutral pricing and hedging of in-play football bets
• Bettors' reaction to match dynamics: evidence from in-game betting
• The minimax bookie: the two-horse case

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