Measuring Bookmaker Risk
Session Title
Session 3-2-D: The Math of Game Play
Presentation Type
Event
Location
The Mirage Hotel & Casino, Las Vegas, Nevada
Start Date
9-6-2016 10:30 AM
End Date
9-6-2016 12:00 PM
Disciplines
Economics | Gaming and Casino Operations Management | International Business | Statistics and Probability
Abstract
The sports betting industry made estimated gross winnings of over $40 billion in 2014 and this industry has been growing significantly especially in European markets where it is liberalised. However there has been no development of a regulatory framework similar to Solvency II for insurers or Basel III for banks that specify the minimum capital required for a bookmaker (betting company) to conduct business. This usually means that the bookmaker is over-reserving or purchasing additional protection for contingency purposes which leads to inefficient use of capital. Alternatively it may result in a bookmaker not having significant funds to cover for adverse outcomes. My work shows the key requirements on odds set by a bookmaker and extends this by calculating the overall risk faced by a bookmaker with a portfolio of bets. This can be used to evaluate the minimum capital requirement for each bookmaker.
Keywords
Solvency, odds, risk, reserves, bookmaking
Measuring Bookmaker Risk
The Mirage Hotel & Casino, Las Vegas, Nevada
The sports betting industry made estimated gross winnings of over $40 billion in 2014 and this industry has been growing significantly especially in European markets where it is liberalised. However there has been no development of a regulatory framework similar to Solvency II for insurers or Basel III for banks that specify the minimum capital required for a bookmaker (betting company) to conduct business. This usually means that the bookmaker is over-reserving or purchasing additional protection for contingency purposes which leads to inefficient use of capital. Alternatively it may result in a bookmaker not having significant funds to cover for adverse outcomes. My work shows the key requirements on odds set by a bookmaker and extends this by calculating the overall risk faced by a bookmaker with a portfolio of bets. This can be used to evaluate the minimum capital requirement for each bookmaker.
Comments
Audio recording of this presentation is attached as a downloadable MP3 audio file, 59.1 MB
This presentation begins at 30:51