How are the odds calculated? Demystifying the game of probability in gambling and investing
In the past 10 days, the discussion about "odds" has remained high on the Internet. Especially in the context of intensified volatility in sports events, cryptocurrency and stock markets, how to calculate and understand odds has become the focus of public attention. This article will expand from three dimensions: definition, calculation method, and practical application, and combine structured data to explain the mystery of odds for you.
1. Definition and types of odds
Odds are a quantitative expression of the probability of an event occurring, and are commonly used in gambling, financial derivatives and other fields. Mainly divided into the following three types:
| Type | Calculation formula | Application scenarios |
|---|---|---|
| Decimal odds (European) | Payout amount = bet amount × odds | European Football Betting |
| Fractional Odds (UK) | Profit = bet amount × (numerator/denominator) | british horse racing |
| American odds | Positive number: Profit = Bet amount × (Odds/100) Negative number: Bet amount = Profit × (100/|Odds|) | NBA event betting |
2. The core logic of odds calculation
The essence of odds is the bookmaker's assessment of event probability and risk control. Its calculation includes two key steps:
| steps | Description | Example (football match) |
|---|---|---|
| 1. Probability estimation | Evaluate the probability of winning/drawing/losing through historical data, real-time status, etc. | Home win 60%, draw 25%, away win 15% |
| 2. Add profit margin | Adjust the sum of implied probabilities to >100% (usually 103%-110%) | After adjustment: home win 58%, draw 24%, away win 13% |
Taking European odds as an example, the specific calculation formula is:Odds = 1 / (adjusted probability × profit margin)
3. Odds cases for popular events in 2023
According to global betting platform data in the past 10 days, the real-time odds of the following hot events reflect market expectations:
| event | Highest odds (European) | Implied probability |
|---|---|---|
| Messi wins Ballon d'Or for eighth time | 1.85 | 54.05% |
| Bitcoin tops $50,000 by year's end | 3.20 | 31.25% |
| British Prime Minister resigns within the year | 6.50 | 15.38% |
4. Things to note when applying odds
1.Identify value bets:When the independently calculated probability > the banker’s implied probability, there is betting value
2.Beware of psychological traps:High odds correspond to low probabilities, and chasing long-term odds will lead to losses.
3.Differences in finance:The “odds” in option pricing need to include factors such as time value
Through the analysis of this article, it can be seen that odds are not only a reflection of mathematical probability, but also include the banker's risk control. Whether it is gambling or financial investment, only by understanding the nature of odds can you make rational decisions. It is recommended that ordinary investors use odds as a reference indicator rather than an absolute basis.
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