A Statistical Arbitrage Trade Based on Betting Price Volatility

Alasdair Brown

Journal of Prediction Markets, 2010, vol. 4, issue 1, 7-15

Abstract: In this note, I derive a probability measure for betting prices on an exchange reaching a target level prior to the market closing. This allows a bettor to take a long (short) position on a bet, and calculate the probability that the short (long) price will yield a profit before the market closes. In effect, this facilitates the statistical arbitrage of betting price volatility.

Date: 2010
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