Risk-Neutral Pricing and Hedging of In-Play Football Bets

Sebastian del Bano Rollin, Zsolt Bihari and Tomaso Aste

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Abstract: A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to this set-up which enables us to derive novel arbitrage-free valuation formul\ae\ for contracts currently traded in the market. We also describe how to calibrate the model to the market and how trades can be replicated and hedged.

Date: 2018-10
New Economics Papers: this item is included in nep-spo
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1811.03931

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