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  1. #1
    New Member
    Join Date
    Apr 2016
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    2

    Exchange Back-Lay Price Discrepancy

    Hi,

    I am not sure I understand exchanges properly, can someone please help me with this example below?

    The available price to back an outcome on an exchange is 2.20. The corresponding lay price is 2.22.
    Assuming a back stake of 100.

    Backer stands to win (2.20 * 100 – initial stake) = 120 * (1 – commission rate); stands to lose 100.

    Layer stands to win 100 * (1 – commission rate); stands to lose 122 (2.22 – 1) * 100.

    If my above calculations are correct, there exists a discrepancy of 2 units more in the total combined kitty that the exchange holds if the layer loses. When the backer wins, the exchange payers the backer 120*(1-c), but has collected 122 units from the layer.

    What happens to the 2 additional units in this instance?

    Thanks

 

 

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