Kingexchange Id Strategies: Mastering Unbiased Arbitrage

We all know about unbiased arbitrage but we don’t understand how unbiased arbitrages work and how we can apply them while betting on an event. Team of Kingexchange Id research team has come up with few strategies so that you can learn more about unbiased arbitrage and use these strategies while betting on any sporting event.

Strategy 1—Unbiased Arbitrage

We'll take two approaches. First, let's bet W total on the market. We want to know how much W to bet on outcome 1 and outcome 2. We can calculate bet amounts for unbiased arbitrage:

w1 = W / (σ1/σ2 + 1)

w2 = W / (σ2/σ1 + 1)

In our Chicago (outcome 1) vs. Miami (outcome 2) example, we want to gamble $100 (W = $100) and our best odds are: σ1 = 2.62, σ2 = 1.68. Chicago and Miami should bets:

Chicago: w1 = $100 / (2.62/1.68 + 1) = $39.07

Miami: w2 = $100/(1.68/2.62 + 1) = $60.93

Total wager: $39.53 + $60.93 = $100.

($39.07 * 2.62) – $100 = $2.36 if Chicago wins.

($60.47 * 1.70) – $100 = $2.36 if Miami wins.

Our profit is $2.36, which is 2.36% (one divided by the margin, minus 1).

Consider betting w2 on Miami. How much should we wager on Chicago (w1) for an unbiased arbitrage profit? In the previous formulations, replacing W with w1 + w2 simplifies to:

w1 = w2 * (σ2 / σ1)

If we want to bet w1 on Chicago and how much on Miami (w2), we utilize the formula:

w2 = w1 * (σ1 / σ2)