One month of composed markets, in money
Two costs sit behind a composed market and only one of them is visible in the price. The visible one is the correlation adjustment, which is what makes the market possible at all. The invisible one is the queue of people who price the requests, and it is spent whether or not a market comes out of the other end.
- turnover, one month
- 170,400.00
- cost avoided
- 28,286.40
- queue cost
- 20,535.00
- markets accepted
- 218
A month of composed markets turns over 170,400.00 on the samples. Pricing the same combinations as the product of their legs would cost the operator 16.6% of that turnover - 28,286.40 - which is what the correlation adjustment avoids. The request queue costs a further 20,535.00 to run, 94.20 for each of the 218 markets it accepts.
The two costs
The first cost is arithmetic. A composed price shorter than the product of the legs is not a charge; it is the difference between a leg-set that returns 100.00 per 100.00 staked and one that returns 116.65. Priced independently on 170,400.00 of turnover, that difference is 28,286.40 in the month and 339,436.80 in a year.
The second cost is human and it is the one operators rarely explain. A request is answered by a person working a model, and the samples price that person's time at 41.07 a request. The month's queue costs 20,535.00; the requests that produce nothing cost 7,639.02 of it. A business that answers requests is therefore paying twice - once to hold the risk correctly and once to say no.
One month, in six figures
What the samples show
| Line | Figure | Where it comes from |
|---|---|---|
| Combination bets in the month | 12,000 | Sample G |
| Mean stake | 14.20 | Sample G |
| Turnover | 170,400.00 | 12,000 x 14.20 |
| The correlation difference | 16.6% | 5.60 against 4.80 on a real 20.83% chance |
| What that difference is worth in the month | 28,286.40 | 0.166 x 170,400.00 |
| Requests answered | 500 | Sample B |
| Queue cost of the month | 20,535.00 | 500 x 41.07 |
| Markets accepted | 218 | Sample B |
| Queue cost per accepted market | 94.20 | 20,535.00 / 218 |
| Queue spent on requests that produced nothing | 7,639.02 | 186 x 41.07 |
| Net of the two lines, before any settlement | 93,016.80 | 339,436.80 against 246,420.00, over a year |
What the arithmetic does not include
Two things are missing from this page and both are deliberate. The first is the settlement outcome: these are expected figures, not realised ones, and a single large combination landing can move a month by more than the queue costs in a year. The second is the cost of the customers who ask and are refused, which is a marketing cost rather than an operational one - 186 people in the month were told no, and the samples say nothing about whether they came back.
- 170,400.00 of turnover against 48,821.40 of cost, which is 28.7% of everything staked.
- 28,286.40 of that is arithmetic rather than effort - the difference between the product and the composed price.
- 20,535.00 is human, and 7,639.02 of it buys nothing.
- 94.20 is what one accepted market costs before anyone stakes on it.
- 339,436.80 is the yearly version of the correlation figure, and it is the reason the composed price is not the product.