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Optimal Bookmaking

Author

Listed:
  • Matthew Lorig
  • Zhou Zhou
  • Bin Zou

Abstract

We introduce a general framework for continuous-time betting markets, in which a bookmaker can dynamically control the prices of bets on outcomes of random events. In turn, the prices set by the bookmaker affect the rate or intensity of bets placed by gamblers. The bookmaker seeks a price process that maximizes his expected (utility of) terminal wealth. We obtain explicit solutions or characterizations to the bookmaker's optimal bookmaking problem in various interesting models.

Suggested Citation

  • Matthew Lorig & Zhou Zhou & Bin Zou, 2019. "Optimal Bookmaking," Papers 1907.01056, arXiv.org, revised Mar 2021.
  • Handle: RePEc:arx:papers:1907.01056
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    File URL: http://arxiv.org/pdf/1907.01056
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    References listed on IDEAS

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