How this casino hedge its risk?

Discussion in 'Risk Management' started by traderzhangSan, Jul 10, 2010.

  1. we all know that final match of world cup will come soon. Here in the city where I am staying right now, some underground gambling house offer the following bets.

    if you bet Spain win, you will win $210 , if you are wrong you lose $200.

    if you bet Netherlands win, you will win $170, if you are wrong, you lose $200.

    if you are running that gambling house, how you hedge your risk?

    clearly even you take same number of bets on each side, you still have huge risk.
  2. I'm no expert but its like position sizing... you take a sufficient number of bets to neutralize your risk from both bettors....

    say you take 24% more bets from the Netherlands than Spain for starts....

    Once the bets start to go too far in one countries favor, they lower the odds eventhough perhaps fundamentally, they may further out in reality than the gambling house will choose to pay out..
  3. You left out the fact that the match could still end in a draw.
  4. Erm, no, this particular match CANNOT possibly end in a draw...

    As someone mentioned, they probably have been able to build a matched book. They could always tweak the odds they offer to attract punters that would hedge them.
  5. Erm, no it can. Many bets of this nature end at FT, including asian handicaps.

    and to OP, who the hell are giving those odds, Spain are favourites here.
  6. The simple answer is if they are illegal they will layoff their 'negative' with legitimate bookie or betting house and keep the vig (5-10%).

    If they are legal they will do more or less the same thing.

  7. u21c3f6


    As has already been mentioned, these odds are wrong.

    Assuming the lines are for winner of the World Cup (no draw), this house should become very unbalanced as no one with any knowledge of the odds will wager on Netherlands. Knowledgeable bettors would wager on Spain with this house and hedge somewhere else by getting somewhere from $160 to $170 per $100 to win on Netherlands.

  8. Not in this case, I would expect. I don't think this is one of your Ladbrokes/WmHill type of places, where there are all sorts of different punts.
  9. Yes it can. Most of these bets end at FT, so a draw is always a possibility unless its a game that involves asian handicap.

    Anyway those odds are definitely wrong, no bookmaker I know has Netherlands as the favourites.
  10. The argument is moot if they don't pay off.
    #10     Jul 11, 2010