Black-Scholes formula

[Professor1215]

Been doing a lot of reading about this lately and cant seem to find anything on the forum.

How can it be used in terms of sports betting?

or

Do you have any links on this already in the forum.

thanks!

[FourLengthsClear]

In theory there is a crossover but in all honesty there are far more fundamental things you need to get a grip of first.

[AlwaysDrawing]

I don't see how Black-Scholes could be directly translated to any sports betting markets. The Black-Scholes model is for pricing options in financial markets. Financial options are dissimilar to bets on sports, since the former are a derivative market for securities that fluctuate greatly in value, and the latter are binomial events and either wholly win or wholly lose (or on occasion, push), while hardly fluctuating at all.

If you mean how can partial differential equations be used in sports betting, there are probably some examples.

Either way, as FLC says, you'll be better served learning much more basic statistics. If you learn how to do binomials, poisson, regressions, and logarithms, you'll be much better served than spending any time on Black-Scholes.

Black-Scholes isn't very good at pricing options (I'd say it's similar to the Coaches Poll in CBB--the higher ranked team usually wins, but you shouldn't place your bets based on the poll), so I doubt anyone has used it to value sports bets.

[Professor1215]

thanks guys. FLC, the formula is way over my head, I did not plan on using it, but I just wanted some more information on it.

[FourLengthsClear]

I don't see how Black-Scholes could be directly translated to any sports betting markets. The Black-Scholes model is for pricing options in financial markets. Financial options are dissimilar to bets on sports, since the former are a derivative market for securities that fluctuate greatly in value, and the latter are binomial events and either wholly win or wholly lose (or on occasion, push), while hardly fluctuating at all.

If you mean how can partial differential equations be used in sports betting, there are probably some examples.

Either way, as FLC says, you'll be better served learning much more basic statistics. If you learn how to do binomials, poisson, regressions, and logarithms, you'll be much better served than spending any time on Black-Scholes.

Black-Scholes isn't very good at pricing options (I'd say it's similar to the Coaches Poll in CBB--the higher ranked team usually wins, but you shouldn't place your bets based on the poll), so I doubt anyone has used it to value sports bets.

You have true spread bets in which work in a similar way as a financial option save for the absence of an 'out of the money' strike price. Likewise these bets can be struck in play.

For example I can buy Manchester United -0.2 goals 20 minutes into a match for say USD 100 per goal.
If they win by 2 goals (I win USD 180, if the match is a draw I lose USD 20 etc.).

Such a bet has the same elements as a financial option and likewise has a potentially volatile underlying 'asset' whereby it is possible, in theory, to exploit inefficiencies. I can't claim to have invested any time on Black-Scholes specifically but deriving theta curves and calculating implied volatilities in in-play markets is something that I have spent (many would say wasted) more than a few hours on.

[Blax0r]

In addition, binary options (http://en.wikipedia.org/wiki/Binary_option) behavior similarly with sports bets, but I'm not expert on the subject. All I know is that it is the 1st derivative of a plain vanilla.