Managing losses in exotic horse race wagering

Please note this paper has been re-typeset by Taylor & Francis from the manuscript originally provided to the previous publisher.

Abstract

We consider a specialized form of risk management for betting opportunities with low payout frequency, presented in particular for exotic horse race wagering. An optimization problem is developed which limits losing streaks with high probability to the given time horizon of a gambler, which is formulated as a globally solvable mixed integer nonlinear program. A case study is conducted using one season of historical horse racing data.

Keywords:

• Forecasting
• nonlinear programming
• optimization
• risk
• sports
• stochastic programming

Acknowledgements

The authors thank the anonymous referees for their valuable comments. This work was partially supported by the Natural Sciences and Engineering Research Council of Canada Discovery Grant programs (RGPIN-2015-06163, RGPIN06524-15), and by the Digiteo Chair C&O program.

Notes

Please note this paper has been re-typeset by Taylor & Francis from the manuscript originally provided to the previous publisher.