A Statistical Arbitrage Trade Based on Betting Price Volatility

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.

Similar works

This paper was published in Research Papers in Economics.

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