How do bookmakers calculate odds?

How do bookmakers calculate odds? post thumbnail image

Odds, or betting quotes, is a basic term in sports betting that reflects the likelihood of a certain event. The bookmaker’s profit depends on the correct formation of odds in order to stay in the black regardless of the outcome of the match.

The principle of creating a coefficient

The main task of the bookmaker is to always make a profit. The bookmaker’s analysts calculate quotes for the event as a whole and individual outcomes, based on the real probability and setting a margin that provides income to the bookmaker.

To understand the essence, let’s use the example of a coin. The chance of each side falling out is 50%. Let’s say you bet $100. e. on “tails”, and your friend the same amount on the “eagle”.

No margin, the winner will receive 200 USD. i.e., the coefficient is 2.0. Under such conditions, not a single office can exist, so the quotes are not 2.0-2.0, but 1.95-1.95, depending on the margin. And now, if you win, you will be paid 195 USD. e., and the remaining 5 c. e. will go to the treasury of the office.

How is the coefficient formed?

The coefficient shows the probability of an outcome according to the bookmaker’s analysts. Ideally, the probability is equal to one or 100%.

It is calculated using the formula k=1/p, where k is the coefficient and p is the probability (between 0 and 1). For example, the chances of an even score in basketball are 50%, which means that the value will be displayed as 0.5 in the formula.

An analyst or a special department of the bookmaker thoroughly studies the event, analyzes the statistics, applies the theory of probability, listens to the opinion of experts and, based on all the information, decides that the first team will win.

Forming quotes, experts are based on the real chances of the outcome. This is what an objective assessment of the probability of the outcome of the match would look like (without the betting margin):

team 1 wins – 70.2%;
draw – 15.3%;
team 2 win – 14.5%.

The sum of real probabilities is 100%. In this case, the majority will bet on the winning of the first team, so the bookmaker secures itself and artificially underestimates the quotes for the W1 outcome, increasing the sum of the probabilities for the event. After such manipulations, the following is obtained:

coefficient on P1 – 1.54 (probability 64.8%);
coefficient on X – 4.22 (probability 23.7%);
coefficient on P2 – 5.4 (probability 18.5).

The sum of the probabilities for this market is 107%. To calculate the margin, divide 100 by the ratio. Do this with all quotes for the outcome (for each team to win and draw, for total over and under, etc.). Add up the results and subtract 100.

Why do odds keep changing?

After calculating the coefficients and laying the margin, the office does not stop influencing the values. First of all, the bets of the players affect the change in quotes. If a large flow of funds is concentrated on one outcome, the coefficient for this market is significantly reduced, and for the opposite one it increases.

Other reasons for the movement of the line are also possible, which are associated with the appearance of new information. F

or example, a key performer has been injured in the team, the coach has changed, or rainy weather is expected. These factors affect both the outcome and the number of goals and other indicators of the game.

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