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Calculating
the bookmaker's profit indicator
First we calculate what could be
termed as the bookmaker's profit indicator. It shows how much the bookmaker
receives in stakes whenever he makes a payment of $1. If odds[1] is the
(European) odds for a home win, the payout from a $1 bet, then 1/odds[1] is
the bookmakers price for a payout of $1 in case of a victory for the home
team. The price for paying out $1 irrespective of the outcome of the outcome
of the game (where you play all three outcomes) is thus:
Profit indicator = (1/odds[1]) +
(1/odds[X]) + (1/odds[2])
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Example |
|
1 |
Brazil |
1.40 |
|
X |
Draw |
3.75 |
|
2 |
England |
5.00 |
|
|
|
|
Profit indicator |
= (1/1.40)
+ (1/3.75) + (1/5.00) |
|
|
= 0.7143 +
0.2667 + 0.2 |
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= 1.181
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In this case the profit indicator
shows that the bookmaker receives a stake of $1.181 for every $1 paid out.
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