FWIW, after taking fees into account, you’d need to think Biden has better than a 70% chance to win the election to make it a rational bet at the current price of $0.64/share. If the average of 538 and The Economist’s forecast (90% chance of Biden victory) is right under the assumptions of their model, then you’d need to think there was a less than 22% chance of some sort of Black Swan.
Could be electoral shenanigans (fraud, incompetence, interference, successful legal challenge) or catastrophe (Biden has an aneurysm) unaccounted for by the models of PredictIt and The Economist makes Trump win the electoral college, or makes neither of them/nobody win.
Certainly that chance is not 0%. But if it were, your EV for a $1,000 bet under these assumptions would be winning $287.
If you think there’s a 5% Black Swan chance (85% chance of Biden victory), your EV is $216.
If you think there’s a 10% Black Swan chance, your EV is $144.
If you think there’s a 15% Black Swan chance, your EV is $73.
If you think there’s a 20% Black Swan chance, your EV is about nil.
FWIW, understanding is that the 538 model is meant to account for the chance of catastrophe but not the chance of electoral interference; i.e. it’s meant to model the result of a hypothetical fair election held on Nov. 3.
And here I was calculating the EV of a Biden bet.
FWIW, after taking fees into account, you’d need to think Biden has better than a 70% chance to win the election to make it a rational bet at the current price of $0.64/share. If the average of 538 and The Economist’s forecast (90% chance of Biden victory) is right under the assumptions of their model, then you’d need to think there was a less than 22% chance of some sort of Black Swan.
Could be electoral shenanigans (fraud, incompetence, interference, successful legal challenge) or catastrophe (Biden has an aneurysm) unaccounted for by the models of PredictIt and The Economist makes Trump win the electoral college, or makes neither of them/nobody win.
Certainly that chance is not 0%. But if it were, your EV for a $1,000 bet under these assumptions would be winning $287.
If you think there’s a 5% Black Swan chance (85% chance of Biden victory), your EV is $216.
If you think there’s a 10% Black Swan chance, your EV is $144.
If you think there’s a 15% Black Swan chance, your EV is $73.
If you think there’s a 20% Black Swan chance, your EV is about nil.
FWIW, understanding is that the 538 model is meant to account for the chance of catastrophe but not the chance of electoral interference; i.e. it’s meant to model the result of a hypothetical fair election held on Nov. 3.