Igor Chudov @ home wrote:
John Anonymous MacDonald wrote:
Ladbroke's (celebrating Halloween, probably) again offers 50:1 odds on Perot! Clinton and Browne are still not being offered. Recalling last Saturday's Dole odds; they were 7:1 at Ladbroke's, and 8:1 at William Hill. The betters at Ladbroke's (who get a somewhat worse deal, it seems) are bullish on Dole, while those at William Hill are now a bit more bearish on the old man, so the numbers diverge in the final stretch of the horserace.
Prices @ 09:21 GMT Sat 2nd Nov 96 +---------+----------------+----------------+ | | Ladbroke's | William Hill | +---------+----------------+----------------+ | Clinton | Not currently offered by either | | Dole | 6:1 | 10:1 |
Whew! They are wide open for arbitrage! Suppose that at Ladbroke I sell an obligation to pay $6 if Dole wins (they are apparently valuing it for this much), collecting $1. At the same time, to hedge my exposure, I go to "William Hill", and purchase their obligation to pay _me_ $10 if Bob Dole wins, paying the $1 bill that I just got at Ladbroke's.
If bob dole loses, I lose nothing. If he wins, I make $4 out of air.
I wonder why the beting markets are so imperfect.
have fun
igor
Homework: guess how should I trade so that I lock in _definite_ profit before elections such that I am fully hedged against any outcome of the election. igor