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Tote arbitrage and lock opportunities in racetrack betting

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  • David Edelman
  • Nigel O'Brian

Abstract

A game-theoretic approach to the investigation of arbitrage opportunities based on combinations of exotic wagers for the same event is described. This situation is also known as a 'lock' or 'Dutch Book'. The technique is applied to recent totalizator data from Australian thoroughbred races. It appears that such opportunities appear fairly regularly, at least according to published final dividends for various bet types. The method is demonstrated in some detail on a particular example.

Suggested Citation

  • David Edelman & Nigel O'Brian, 2004. "Tote arbitrage and lock opportunities in racetrack betting," The European Journal of Finance, Taylor & Francis Journals, vol. 10(5), pages 370-378.
    • Handle: RePEc:taf:eurjfi:v:10:y:2004:i:5:p:370-378
    DOI: 10.1080/1351847042000199042
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    References listed on IDEAS

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    1. Hausch, Donald B & Ziemba, William T, 1990. "Arbitrage Strategies for Cross-Track Betting on Major Horse Races," The Journal of Business, University of Chicago Press, vol. 63(1), pages 61-78, January.
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    Cited by:

    1. Kazuki Okamoto & Mototsugu Fukushige, 2022. "Favourite–longshot biases in a pari-mutuel system without cross arbitrage," Economics Bulletin, AccessEcon, vol. 42(1), pages 203-207.
    2. Egon Franck & Erwin Verbeek & Stephan Nüesch, 2013. "Inter-market Arbitrage in Betting," Economica, London School of Economics and Political Science, vol. 80(318), pages 300-325, April.
    3. Marshall, Ben R., 2009. "How quickly is temporary market inefficiency removed?," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 917-930, August.
    4. Egon Franck & Erwin Verbeek & Stephan Nuesch, 2009. "Inter- market Arbitrage in Sports Betting," NCER Working Paper Series 48, National Centre for Econometric Research.
    5. Masahiro Ashiya, 2015. "Lock! Risk-Free Arbitrage in the Japanese Racetrack Betting Market," Journal of Sports Economics, , vol. 16(3), pages 322-330, April.
    6. Andrew Grant & Anastasios Oikonomidis & Alistair C. Bruce & Johnnie E. V. Johnson, 2018. "New entry, strategic diversity and efficiency in soccer betting markets: the creation and suppression of arbitrage opportunities," The European Journal of Finance, Taylor & Francis Journals, vol. 24(18), pages 1799-1816, December.
    7. Nikolaos Vlastakis & George Dotsis & Raphael N. Markellos, 2009. "How efficient is the European football betting market? Evidence from arbitrage and trading strategies," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(5), pages 426-444.

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