Tuesday, June 13, 2006

World Cup Arbitrage

According to the BBC [June 8th, 2006], UK bookmakers are heavily exposed to the risk of England's winning the world cup. I find this hard to believe.

Not surprisingly, there are national distortions in betting. In the UK, England is the second favourite after Brazil. Someone on the radio said you can get much better odds on England if you bet in Germany. Can this really be true?

If UK punters are willing to bet on England at only 6/1, and bookmakers in other countries are willing to offer much longer odds, then there is an opportunity to make big money trading between these two positions. This is called arbitrage.

So who is going to cash in?
  1. British punters pretending to be domiciled elsewhere, in order to place bets elsewhere.
  2. British punters collaborating with German punters (perhaps via Web 2.0 social networking)
  3. Some clever programmers creating a Web 2.0-style betting mashup.
  4. The bookmakers trading between themselves.
Much as I'd love to see private individuals profiting from this situation, my money is on the last of these possibilities.

[Update] Werner Vogels reports what are the odds available in Las Vegas. Comparison available at OddsChecker.

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