Investing in the Modern Age by Rachel E S Ziemba

PART I
Key Concepts

Arbitrage, Risk Arbitrage and the Favoritelongshot Bias
1
Arbitrage in its pure form is to construct a sure bet so that no matter the
outcome, you either break even or turn a profit. Most observers say that
arbitrage does not exist but actually it does in many instances because there
are different financial markets for the same sports betting or financial
security situation. This is because different people have different sets of
information and beliefs. Lets take the simplest case: either A or B wins. Let
Oah be the odds given on the event that A wins from betting source h and
Obi that for 13 winning from betting source i. With these; UK odds, the odds
are the total return per 1 unitbet. In (comparison, US odds are UK odds -1
and their payoffs are US odds +1 = UK odds.

Pure arbitrage exist when

Investing in the Modern Age by Rachel E S Ziemba