Presentation Title

Measuring Bookmaker Risk

Panel Title

Session 3-2-D: The Math of Game Play

Location

The Mirage Hotel & Casino, Las Vegas, Nevada

Start Date

9-6-2016 10:30 AM

End Date

9-6-2016 12:00 PM

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

Disciplines

Economics | Gaming and Casino Operations Management | International Business | Statistics and Probability

Comments

Audio recording of this presentation is attached as a downloadable MP3 audio file, 59.1 MB

This presentation begins at 30:51

32D_CortisD_pres_MeasuringBookmarker.mp3 (59159 kB)
Audio recording of presentation

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Jun 9th, 10:30 AM Jun 9th, 12:00 PM

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.