Valuation and Hedging of Sports Futures Wagers

Journal of Prediction Markets, No. 1, 2017, 66-81

25 Pages Posted: 9 Jun 2016 Last revised: 8 Feb 2018

See all articles by Thomas J. O'Brien

Thomas J. O'Brien

University of Connecticut - Department of Finance

Reinhold Lamb

University of North Florida

Date Written: October 3, 2016

Abstract

This study investigates, in a conceptual way, the intrinsic valuation of sports futures wagers and, given the absence of a viable secondary market, strategies for locking in pre-expiration value by hedging with the existing set of futures wagers, proposition wagers, and game wagers. An interesting finding is that effective hedging with game wagers generally involves games of teams other than the futures team, in addition to the futures-team’s games. The paper also shows how to use current game odds and futures odds to find the implicit projected odds on future games, conditional on the match-ups to be determined by the outcomes of current games.

Keywords: valuation, hedging, sports betting, futures

JEL Classification: G13

Suggested Citation

O'Brien, Thomas J. and Lamb, Reinhold, Valuation and Hedging of Sports Futures Wagers (October 3, 2016). Journal of Prediction Markets, No. 1, 2017, 66-81. Available at SSRN: https://ssrn.com/abstract=2790631 or http://dx.doi.org/10.2139/ssrn.2790631

Thomas J. O'Brien (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States
860-486-3041 (Phone)
860-486-0634 (Fax)

HOME PAGE: http://www.business.uconn.edu/staff.asp?id=57

Reinhold Lamb

University of North Florida ( email )

4567 St. Johns Bluff Road, South
Jacksonville, FL 32224-2645
United States

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