Arbitrage Opportunities and Market-Making Traders in Prediction Markets

被引:0
|
作者
Luckner, Stefan [1 ]
Weinhardt, Christof [1 ]
机构
[1] Univ Karlsruhe, KSRI, Karlsruhe, Germany
关键词
D O I
10.1109/CEC/EEE.2008.52
中图分类号
F [经济];
学科分类号
02 ;
摘要
Prediction markets are a promising approach for predicting uncertain future events and developments. These markets will work well if they are efficient and in efficient markets, one does not expect arbitrage opportunities to be persistent. This paper therefore studies whether pure arbitrage opportunities existed in a sports prediction market. Moreover, market liquidity can become an issue in prediction markets since new information is potentially not immediately reflected in trading prices and traders might also lose interest in the markets if they are illiquid. This paper there fibre analyzes whether traders try to exploit illiquidity by taking on the role of market makers in prediction markets. Our analysis of a sports prediction market for the FIFA World Cup 2006 shows that prediction markets also appear to be efficient in the sense that there are few substantial arbitrage opportunities available. Furthermore, we find that market markers play an important role in prediction markets. They serve as liquidity providers and allow for continuous trading.
引用
收藏
页码:53 / 59
页数:7
相关论文
共 50 条
  • [1] The unfolding of conceivable practice trajectories as market-making opportunities
    Bulawa, Nicole
    Jacob, Frank
    [J]. MARKETING THEORY, 2024,
  • [2] A Mean-Field Game of Market-Making against Strategic Traders\ast
    Baldacci, Bastien
    Bergault, Philippe
    Possama, Dylan
    [J]. SIAM JOURNAL ON FINANCIAL MATHEMATICS, 2023, 14 (04): : 1080 - 1112
  • [3] THE ECONOMICS OF MARKETS - A SIMPLE-MODEL OF THE MARKET-MAKING PROCESS
    GOULD, JP
    [J]. JOURNAL OF BUSINESS, 1980, 53 (03): : S167 - S187
  • [4] THE ECONOMICS OF MARKETS - A SIMPLE-MODEL OF THE MARKET-MAKING PROCESS - COMMENTS
    SEN, SK
    [J]. JOURNAL OF BUSINESS, 1980, 53 (03): : S189 - S191
  • [5] Adaptive Multi-strategy Market-Making Agent for Volatile Markets
    Raheman, Ali
    Kolonin, Anton
    Glushchenko, Alexey
    Fokin, Arseniy
    Ansari, Ikram
    [J]. ARTIFICIAL GENERAL INTELLIGENCE, AGI 2022, 2023, 13539 : 250 - 259
  • [6] DEALERSHIP MARKET - MARKET-MAKING WITH INVENTORY
    AMIHUD, Y
    MENDELSON, H
    [J]. JOURNAL OF FINANCIAL ECONOMICS, 1980, 8 (01) : 31 - 53
  • [7] Large traders, hidden arbitrage, and complete markets
    Jarrow, R
    Protter, P
    [J]. JOURNAL OF BANKING & FINANCE, 2005, 29 (11) : 2803 - 2820
  • [8] MARKET-MAKING AND ASSESSMENT OF MARKET EFFICIENCY
    LOGUE, DE
    [J]. JOURNAL OF FINANCE, 1975, 30 (01): : 115 - 123
  • [9] Fragmentation and Strategic Market-Making
    Daures-Lescourret, Laurence
    Moinas, Sophie
    [J]. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, 2023, 58 (04) : 1675 - 1700
  • [10] Market-making with search and information frictions
    Lester, Benjamin
    Shourideh, Ali
    Venkateswaran, Venky
    Zetlin-Jones, Ariel
    [J]. JOURNAL OF ECONOMIC THEORY, 2023, 212