The most exciting game

Authors Julio D. Backhoff Veraguas, Mathias Beiglböck

Publication date 23 May 2023

Abstract: Motivated by a problem posed by Aldous, our goal is to find the maximal-entropy win-martingale: In a sports game between two teams, the chance the home team wins is initially

x_{0} i n (0, 1)

and finally 0 or 1. As an idealization we take a continuous time interval

[0, 1]

and consider the process

M = (M_{t})_{t i n [0, 1]}

giving the probability at time

t

that the home team wins. This is a martingale which we idealize further to have continuous paths. We consider the problem to find the most random martingale

M

of this type, where `most random' is interpreted as a maximal entropy criterion. We observe that this max-entropy win-martingale

M

also minimizes specific relative entropy with respect to Brownian motion in the sense of Gantert and use this to prove that

M

is characterized by the stochastic differential equation

dM_t = frac{sin (pi M_t )} {pisqrt {1-t}}, dB_t.

To derive the form of the optimizer we use a scaling argument together with a new first order condition for martingale optimal transport which may be of interest in its own right.

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