Fixed Odds Bookmaking with Stochastic Betting Demands
研究英国赛马博彩市场中，庄家面对随机投注需求时如何设定赔率以平衡风险，并解释热门-冷门偏差现象。
This paper studies fixed odds bookmaking in the market for bets in a British horse race. The bookmaker faces the risk of unbalanced liability exposures. Even random shocks in the noisy betting demands are costly to the bookmaker since his book could become less balanced. In our model, the bookmaker sets appropriate odds to influence the betting flow to mitigate the risk. The stylised fact of the favourite-longshot bias only arises from the model under specific assumptions. Our model offers insights into the complexity of managing a series of state contingent exposures such as options.