|
|
Order book microstructure and fair price estimation on betting exchanges
Smutný, Josef ; Fanta, Nicolas (advisor) ; Kukačka, Jiří (referee)
The aim of this paper is to predict the fair price as accurately as possible from the microstructure of the orderbook on Betfair, the world's largest betting exchange. In particular, the work focuses on the analysis of the effect of disproportionately large quotes on the fair price of the market. It also addresses their theoretical monetization in practice in the case of market inefficiency. The results show that, from the data examined, traded markets are relatively efficient and the factors that can be inferred from the microstructure of the orderbook are, in the vast majority of cases, not statistically significant for predicting the fair price of a given event. However, the data do show exceptions where, in particular types of markets, these quotes are statistically significant and have the expected impact on the model's prediction in the form of increasing the probability of the selection they want to trade. Thus, the model prediction can in some cases be used as a fair price indicator by which one could theoretically trade profitably on Betfair or even on other platforms, assuming they offered a better price. Keywords Betting exchange, Fair price, Quotes, Betting odds, Back, Lay, Spread Title Order book microstructure and fair price estimation on betting exchanges
|
|
|
Principles of trading on betting exchanges
Karásek, Michal ; Málek, Jiří (advisor) ; Moravec, Lukáš (referee)
Unlike traditional stock exchanges, where bonds, shares and financial derivatives are traded, on the betting exchanges there are traded probabilistic estimates of the results of sporting or social events. The market price of bets, namely the market implied probability is influenced by estimate of the outcome. The specificity of betting exchanges is also a short period to maturity of contracts, and the possibility to trade with the estimated result of one real world event in several sub-markets simultaneously. In theoretical analysis, we have defined the bet, the underlying asset, and the binary betting contract, which is traded on betting exchanges. We have described some practical aspects of trading. Properties of the probabilistic contracts are demonstrated on several examples. Finally, we constructed the mathematical model of a tennis match, which is based on a binomial valuation model. This allows us to compare the market price of a contract with the price recommended by the model.
|
guest ::
