Margin Methods Overview

TRADE Current Margin Calculation

Existing Method: Multiplicative Margin Method

• How It Works:

  • Adjusts the margin relative to implied probability.

  • In practice, we multiply the total probably by the odds of the specific bet.

  • Higher probability → Higher margin.

  • Lower probability → Lower margin.

• Advantages:

  • Simple and widely used.

  • Provides reasonable accuracy for most scenarios.

• Challenges:

  • Struggles with favorite-longshot bias.

  • May produce probabilities exceeding 100%.

• Scores:

  • Accuracy: Moderate

  • Suitability: Common bets

  • Probability Control: May exceed 100%

  • Bias Handling: Weak

Existing Method: Power Margin Method

Overview

• How It Works:

  • Normalization-based approach that distributes margins more efficiently using a power multiplier.

• Advantages:

  • Ensures probabilities remain within the valid range of [0,1].

  • Reduces biases associated with high odds bets.

  • Demonstrated better performance in experimental testing.

• Findings:

  • Outperforms the Multiplicative Method, especially in markets with high odds (>3.5).

  • In low-odds markets, performance differences are minimal.

• Scores:

  • Accuracy: High

  • Suitability: All bets

  • Probability Control: Always within [0,1]

  • Bias Handling: Strong

Existing Method: Additive Margin Method

• How It Works:

  • Subtracts an equal amount of margin from each bet based on the number of bets in the market.

• Advantages:

  • Simple and easy to apply.

• Challenges:

  • Does not account for differences in probability between bets.

  • Tends to favor longshots, leading to inefficiencies.

• Scores:

  • Accuracy: Low

  • Suitability: Basic use

  • Probability Control: Equal distribution

  • Bias Handling: Weak

Comparing Margin Calculation Methods

Method	Accuracy	Suitability	Probability Control	Bias Handling
Multiplicative	Moderate	Common bets	May exceed 100%	Weak
Power	High	All bets	Always within [0,1]	Strong
Additive	Low	Basic use	Equal distribution	Weak

Our Research Findings

Experiment Insights

• Conducted across multiple sports: Football, Basketball, Tennis, Ice Hockey, etc.

• Tested in-play & pre-match markets at different time points.

• Used Mean Absolute Error (MAE) to compare true vs. implied probabilities.

• Power Method consistently outperformed the Multiplicative Method in key betting scenarios.

Key Takeaways

• Power Method is recommended, particularly for high-odd markets.

• Multiplicative remains viable for low-odd markets where the performance difference is negligible.

• Offering flexibility empowers clients to optimize their strategies.

Examples

Example 1

Raw odd	Raw prob	Multiplicative	Additive	Power
1.18	0.847	1.277	1.219	1.208
7.15	0.139	7.740	8.901	9.518
10.5	0.095	11.366	14.766	14.782

sum 1.082

total_margine 0.0825

Example 2

Raw odd	Raw prob	Multiplicative	Additive	Power
1.224	0.817	1.359	1.282	1.268
5.91	0.169	6.565	7.562	8.045
8.02	0.1247	8.909	11.399	11.511

sum 1.11

total_margine 0.11