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Managing your risk landscape
Sun 24 Apr 2016 @ 11:53
The mega prize offered by William Hill at the start of this football season caught our attention recently. They offered a £50,000,000 jackpot (yes, you heard correctly: £50 million) for anyone that could predict the exact finishing order of the Barclays Premier League.
Now, for everyone involved in football gaming and predictions, pre-season is an exciting time. Each new season brings new challenges, so players are keen to establish the best value in the markets with extensive research while making their own predictions on who will finish where in the division.
Could you have estimated your chances of winning?
At PIMS-SCA that’s what we do every day, we take on the challenge of estimating the chances of winning and we love it; but let’s get back to the William Hills £50 million promotion in more detail.
William Hill limited the number of £2 bets to 1,000,000. This meant maximum bet revenue would be £2 million against a potential prize of £50 million. Clearly, William Hill didn’t believe anyone would win. This may explain why a consolation prize of £100,000 for the nearest guess at a given point in time was on offer.
As William Hill were only taking in bets of 4% of the prize, they must have thought the odds of winning would be enormous. Just to break even, on an odds versus bet comparison, they would have to believe the odds to be at least 25,000,000 to 1, but we suspect William Hill felt the odds were very much higher than that.
These type of contests are very difficult to analyse because the player’s skill and judgement come into play which makes the risk management much more difficult.
That said as a starting point for working out the odds, the team here at PIMS-SCA got our mathematical heads together and this is what we came up with.
We made a few simple assumptions based on what we all know about the placement of the Barclay Premier League in recent years.
- The top 4/5 teams are usually the same every season but the order of these teams change. This season has been extraordinary with Leicester City taking an early spot at the top of the league and maintaining their position. Most regular seasons see the top 4 or 5 teams come from a bank of 5 or 6 clubs.
- Also, the bottom maybe 5 or 6 teams were equally easy to predict but again not in a correct order.
- The remaining 10 or so teams were the “usual suspects” but the order they finished was pretty random.
It became a bit geekier and mathematical from this point in as we had to calculate the number of combinations for each of the three designated sections.
- Top 4: Odds = 4 x 3 x 2 x 1 = 24
- Bottom 6: Odds = 6 x 5 x 4 x 3 x 2 x 1= 720
- Middle 10: Odds = 10 x 9 x 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 = 3,628,800
And finally, by multiplying each of the sections, we were able to calculate that the overall odds would potentially be an enormous 64 billion to 1.
Is this a perfect approach? Probably not, as it’s too simplistic but it’s of great help and a good starting point when trying to get your head around any risk and the premium that might be required to take on such a massive insured prize.
Unfortunately we didn’t insure the William Hill contest. With the unpredictable performance of Leicester and Chelsea we really missed out on a great piece of business!
Speak to PIMS about your next jackpot prize promotion on 020 7255 7900 or email firstname.lastname@example.org.