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In the field of sports betting, the financial parameters of risk, profitability and performance are not often assessed(especially when the number of games increase). Therefore some terms used on this site or somewhere else, deserve to be defined or specified. |
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| 1) Bookmaker. |
| | A bookmaker is a company which activity consists in proposing bets, mainly on sports events, the poker or the horse-races.
The margin ( M ) of the bookmaker corresponds to the payment which it collects on an event. This payment can be express in percentage of the stakes and can be calculated from the following formula:
( 1/(odds1 - M) + 1/(oddsN - M) + 1/(odds2 - M)) = 1 / (1 - M)
It is possible to encounter on the internet, the following formula which does not seem to be correct :
M = ( 1/odds1 + 1/oddsN + 1/odds2 ) - 1 |
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| 2) The odds. |
| | The odds allows to calculate the profit associated with a bet. It represents the opposite of the probability of occurrence of a result. The more the odds is small, the more the probability is high: odds = 1/probability. It can be given in decimal (ex: 1.5 or 3.2) form. The profit is calculated according to the following formula:
profit = stake * (odds - 1).
The British odds can be given in the form of fraction (ex: 1/2 or 2/1). The formula giving the profit is:
profit = stake * odds.
In USA odds can be expressed in the form of positive or negative number (ex: 200 or -200). The negative odds indicate the stake necessary for a profit of 100 and the positive odds indicate the profit corresponding to a stake of 100. To calculate the profit associated with an American odds it is necessary to use the formulae:
Profit = Stake * 100 / (-odds) for the negative odds.
Profit = Stake * 100 / odds for the positive odds. |
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| 3) Betting methods. |
| | We define a method as a combination of several bets (of identical or different types), on a coupon for a fixed number of games (ex for 7 games: 3 singles and 4 double chance, which we can represent by 3S-4D). |
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| 4) Betting techniques. |
| | A technique corresponds rather to a strategy, aiming generally at maximizing the frequency or the importance of the earnings(gains), and\or minimizing the risks and thus the stakes. So a technique can bring in one or several methods. |
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| 5) The profitability of a method. |
| | The global odds of a method combining several bets, is the product of the odds on every bet, returned to the situation of an equivalent unique bet. The earnings are given as follows:
earnings = stake * (global odds).
The profitability of a method being defined as the ratio earnings / stake, and corresponds therefore to the global odds of the method.
For the simplest methods (1 coupon, 1 game) the profitability is equal to the odds. |
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| 6) The risk of a method. |
| | For every bet involved in a method, the probability of NO FAILURE (not to confuse with the probability of success) can be estimated. We can then determine the global probability of NO FAILURE for an implementation of the method. The risk of a method is calculated according to the following formula:
Method Risk = 1 / probability of NO FAILURE.
We could think that the risk becomes quite close to global odds defined previously. It is the case for simple methods (1 coupon, 1 game). The difference can be justified by the margin of the Bookmaker. On the other hand, for more complex situations, the risk will be more raised than the global odds. |
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| 7) The performance of a method. |
| | We define the performance of a method simply as the ratio of the profitability over the risk :
Performance = Profitability / Risk
A very profitable, but very risky method can so turn out, less interesting than another one twice less profitable but 5 times less risky (its performance being then 2,5 times more important). |
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