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arXiv · 1811.03931

Risk-Neutral Pricing and Hedging of In-Play Football Bets

Sebastian del Bano Rollin·Zsolt Bihari·Tomaso Aste
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Abstract

A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to this set-up which enables us to derive novel arbitrage-free valuation formulæ for contracts currently traded in the market. We also describe how to calibrate the model to the market and how trades can be replicated and hedged.

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Sebastian del Bano Rollin, Zsolt Bihari, Tomaso Aste. 2018-10-29. Risk-Neutral Pricing and Hedging of In-Play Football Bets. https://arxiv.org/abs/1811.03931

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