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Risk-Neutral Pricing and Hedging of In-Play Football Bets

Aste, T; Divos, P; Del Bano Rollin, S; Bihari, Z; (2018) Risk-Neutral Pricing and Hedging of In-Play Football Bets. Applied Mathematical Finance , 25 (4) pp. 315-335. 10.1080/1350486X.2018.1535275. Green open access

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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 formulæ 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.

Type: Article
Title: Risk-Neutral Pricing and Hedging of In-Play Football Bets
Open access status: An open access version is available from UCL Discovery
DOI: 10.1080/1350486X.2018.1535275
Publisher version: https://doi.org/10.1080/1350486X.2018.1535275
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Asset pricing, hedging, football, betting
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science
URI: https://discovery.ucl.ac.uk/id/eprint/10059998
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