An Investment Game

Abstract

In this paper we present a novel investment game, taking a quantitative finance approach to football tournaments, cast as a model of a complete market. We show how the market and securities corresponding to stocks in teams, index funds for leagues, and derivatives on players can be defined and priced using the Elo framework for team strength. This framework allows us to also introduce analytics for both realized performance and predictive modeling, linking it to both the literature on optimal wagers and risk & portfolio management. The game was first developed and run live, for charity, during the 2014 World Cup.