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A STATISTICAL ARBITRAGE TRADE BASED ON BETTING PRICE VOLATILITY

Alistair Brown

Abstract


In this note, I derive a probability measure for betting prices on an exchange reaching a target level prior to the market closing.  This allows a bettor to take a long (short) position on a bet, and calculate the probability that the short (long) price will yield a profit before the market closes.  In effect, this facilitates the statistical arbitrage of betting price volatility.


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References


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DOI: http://dx.doi.org/10.5750/jpm.v4i1.470

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