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It isn't that simple is it? What about payoffs and probabilities? A financial firm can buy/sell in open market (often with market making privileges) to remain
by zeusk 9y ago
It isn't that simple is it?
What about payoffs and probabilities? A financial firm can buy/sell in open market (often with market making privileges) to remain delta neutral but what does a betting exchange do?
- user5994461 9y agoNot sure what you mean by payoff. In a normal exchange, you see the price and it goes up and down. In betting, you see the probability going up and down. It's also the multiplier on what you will win. In the previous example, they would bet £5 at 50/50.
- bostik 9y agoA betting exchange is a financial escrow service. A user bets on a result of an event, with 20% probability of the event happening. This means that someone (often a market maker) is willing to bet with 80% probability of that same event not happening. User waged £10, and if they win, expect to net £40. That "other" £40 came from the counterparty. A betting exchange facilitates this. It sets aside ("escrows") the funds from both parties' accounts, and once the results of the event are known, settles the trades. Funds from escrow, minus the commission, are credited to winner's account. The basic premise really is that simple. Now, running an exchange is anything BUT simple.