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Confused about EV calculation in guide example

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Hi 😀,

Just got a question, I might be wrong, but just want to understand. 

On this page:


Under the "Example of an ‘If Bet’ offers" heading where the EV is calculated for a 2nd/3rd offer for the horse named "Vivendi".

There is an image that shows the text (with typos 😝 haha):

Probabiliy of horse coming first = 1/2.78 = 36%

So from my understanding, the back odds denote the probability of something happening and the lay odds denote the probability of something NOT happening.
But in this example, the 2.78 value above is the lay odds.
Shouldn't this use the win back odds of 2.70 from the bookmaker?  ...or maybe the win back odds from betfair which is 2.76? I'm confused.
So the probability of the horse coming first should be worked out using the odds 2.70, not 2.78?

...but if that example is wrong, then the overs calculator would also be wrong, which makes me think I'm wrong 😆



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Hi @mun_muns that's a great question.

A bookmakers odds have a margin (how they make a profit) so they don't reflect accurately the chance of the outcome occurring.

Betfair have shown that their SP reasonably accurately represents the chance of a horse winning. https://www.betfair.com.au/hub/betfair-starting-price-bsp/ 

The Betfair Back and lay prices are the prices you can take currently to back and lay.

In a very efficient market the price may be 2.76 to back and 2.78 to lay. So using either of those figure or a figure in the middle of those would make little difference to your EV calculation.

We err on the side of caution and under value our EV than over estimate. In the case above it would make little difference. But if you were using something like a greyhound market with little liquidity you may find the back brice is 3.2 and the lay price is 4.2. If you used the back price as the chance of that dog winning you may be overestimating it's chance. The lay price is the price you can effectively take so by using that in your calculations you are using figures that reflect what is currently available. 

In that case the true price may be somewhere in the middle, but also in inefficient markets there is plenty of opportunities for the price to move around quickly. 

Let me know if you have any more questions


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