MediumMarket Making & Games
Two Bookmakers, One Arbitrage
SIG / SusquehannaFlow Traders
Bookmaker A offers decimal odds of 2.2 on team X winning; bookmaker B offers decimal odds of 2.2 on team X not winning (decimal odds = total payout per 100, split so that your payout is the same either way. What is your guaranteed profit, in dollars?
Approach
Convert each quote to an implied probability: 1 / decimal odds.
If the implied probabilities sum to less than 1, the book can be beaten.
Answer
Show the final answer
The answer is 10. Sign in free for the full worked solution and to check your own answer.
Related problems
Make a Market on Two DiceEasyRoll, Keep or Re-rollMediumThe Bookmaker’s EdgeMediumOdds to ProbabilityEasyQuoting Against Informed FlowHardKelly with 2-to-1 OddsMedium
More in Market Making & Games.