Re: anonymous oddsman

[Asgaard <asgaard@Cor.sos.sll.se>]

On Sat, 2 Nov 1996 ichudov@algebra.com wrote:

> >         | Clinton | Not currently offered by either |
> >         | Dole    |     6:1        |     10:1       |
> 
> Whew! They are wide open for arbitrage! Suppose that at Ladbroke I sell
> an obligation to pay $6 if Dole wins (they are apparently valuing it for
> this much), collecting $1. At the same time, to hedge my exposure, I go
> to "William Hill", and purchase their obligation to pay _me_ $10 if Bob
> Dole wins, paying the $1 bill that I just got at Ladbroke's.

The problem is that Ladbroke won't take your offer, they don't
work that way. If they wanted to insure against a Dole victory
they would place some of the money they got from betters on Dole
at William Hill, at 10:1, instead of taking your offer at 6:1.
But probably they get too few bets on Dole to bother with insurance;
they do take risks. Another way of insuring themselves would have
been to offer 11/10 or something on Clinton but obviously they
don't feel they have to do that.

Asgaard