Making A 'book' (and The Notion of Overround)
A bookmaker strives to accept bets on the outcome of an event in the right proportions so that he makes a profit regardless of which outcome prevails. See Dutch book and coherence (philosophical gambling strategy). This is achieved primarily by adjusting what are determined to be the true odds of the various outcomes of an event in a downward fashion (i.e. the bookmaker will pay out using his actual odds, an amount which is less than the true odds would have paid; thus hopefully ensuring a profit).
The odds quoted for a particular event may be fixed (as in the case of a football match for example) or may fluctuate to take account of the size of wagers placed by the bettors in the run-up to the actual event (e.g. a horse race). This article explains the mathematics of making a book in the (simpler) case of the former event. For the second method, see Parimutuel betting
It is important to understand the relationship between odds and relative probabilities: Thus, odds of a-b (a/b or a to b) represent a relative probability of b/(a + b), e.g. 6-4 (6 to 4) is 4/(6 + 4) = 4/10 = 0.4 (or 40%). A relative probability of x represents odds of (1 − x)/x, e.g. 0.2 is (1 − 0.2)/0.2 = 0.8/0.2 = 4/1 (4-1, 4 to 1).
Read more about this topic: Mathematics Of Bookmaking
Famous quotes containing the words making and/or notion:
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By making it truly happen. It drifts away in fragments.
And one is left sitting in the yard
To try to write poetry
Using what Wyatt and Surrey left around....”
—John Ashbery (b. 1927)
“If you are to judge a man, you must know his secret thoughts, sorrows, and feelings; to know merely the outward events of a man’s life would only serve to make a chronological table—a fool’s notion of history.”
—Honoré De Balzac (1799–1850)