How Do Bookmakers respond To Arbitrage Traders?
From a business perspective bookmakers are only interested in ensuring that they generate value in every book they make. An arbitrageur’s money is as good as any other punter’s and since at least half of all the bets an arbitrageur makes will lose, the bookmaker is likely to value his or her business. There is a general misconception concerning a bookmaker’s need to balance his book. It is usually believed that in an ideal book, punters would stake the amount on each possible outcome of a ‘two horse race’ such that the bookmaker’s liability is balanced regardless of the outcome. By achieving an equal liability on both eventualities, with his margin built in, the layer is able to ensure a risk-free profit for himself. That perception however does not necessarily apply to large bookmakers with plenty of working capital & lots of active clients. These companies need not be concerned with balancing their books; they merely need to attract enough turn-over on every event. This will automati
