Arbitrage between play-money and real-money markets
Jed Christiansen July 23rd, 2008
I’ve been running a niche prediction market site for research over the last three summers. Recently, some of these play-money markets overlapped with real-money markets currently on-going on Betfair.
In my post over at Mercury’s Blog, I discuss how I’ve used play-money market wisdom to take advantage of some poor market-makers on the real-money Betfair markets. Specifically, the favourite on one particular play-money market has a probability to win of ~80% (which I think is fairly accurate). I managed to buy that same contract on Betfair at the equivalent of a 40% probability. Similar examples still exist because of market makers that skewed initial odds towards long-shots (at least by play-money market standards).
Perhaps this will strike some conversation on potential arbitrage between play-money and real-money prediction markets.
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