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A Statistical Arbitrage Trade Based on Betting Price Volatility

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  • Alasdair Brown

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.

Suggested Citation

  • Alasdair Brown, 2010. "A Statistical Arbitrage Trade Based on Betting Price Volatility," Journal of Prediction Markets, University of Buckingham Press, vol. 4(1), pages 7-15, May.
    • Handle: RePEc:buc:jpredm:v:4:y:2010:i:1:p:7-15
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