Risk-Neutral Pricing and Hedging of In-Play Football Bets
Trading and Market Microstructure
2018-11-12 v1
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 formul\ae\ 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.
Keywords
Cite
@article{arxiv.1811.03931,
title = {Risk-Neutral Pricing and Hedging of In-Play Football Bets},
author = {Sebastian del Bano Rollin and Zsolt Bihari and Tomaso Aste},
journal= {arXiv preprint arXiv:1811.03931},
year = {2018}
}
Comments
21 pages, 4 Tables, 8 Figures