shin 0.0.2

Python implementation of Shin's method for calculating implied probabilities from bookmaker odds

shin

A Python implementation of Shin's method [1, 2] for calculating implied probabilities from bookmaker odds.

Probabilities calculated in this way have been shown to be more accurate than those obtained by the standard approach of dividing the inverse odds by the booksum [3].

Installation

Requires Python 3.5 or above.

pip install shin

Usage

Three or more outcomes

import shin

shin.calculate_implied_probabilities([2.6, 2.4, 4.3])

{'implied_probabilities': [0.37299406033208965,
  0.4047794109200184,
  0.2222265287474275],
 'iterations': 425,
 'delta': 9.667822098435863e-13,
 'z': 0.01694251276407055}

The returned dict contains the following fields:

• implied_probablities
• iterations - with three or more outcomes, Shin's method uses an iterative procedure. Compare this value to the max_iterations argument (default = 1000) to check for failed convergence
• delta - the final change in z (see below) for the final iteration. Compare with the convergence_threshold argument (default = 1e-12) to assess convergence
• z - the estimated proportion of theoretical betting volume coming from insider traders

Two outcomes

import shin

shin.calculate_implied_probabilities([1.5, 2.74])

{'implied_probabilities': [0.6508515815085157, 0.3491484184914841],
 'iterations': 0,
 'delta': 0,
 'z': 0.03172728540646625}

When there are only two outcomes, z can be calculated analytically [3]. In this case, the iterations and delta fields of the returned dict are 0 to reflect this.

Note that with two outcomes, Shin's method is equivalent to the Additive Method of [4].

References

[1] H. S. Shin, “Prices of State Contingent Claims with Insider traders, and the Favorite-Longshot Bias”. The Economic Journal, 1992, 102, pp. 426-435.

[2] H. S. Shin, “Measuring the Incidence of Insider Trading in a Market for State-Contingent Claims”. The Economic Journal, 1993, 103(420), pp. 1141-1153.

[3] E. Štrumbelj, "On determining probability forecasts from betting odds". International Journal of Forecasting, 2014, Volume 30, Issue 4, pp. 934-943.

[4] S. Clarke, S. Kovalchik, M. Ingram, "Adjusting bookmaker’s odds to allow for overround". American Journal of Sports Science, 2017, Volume 5, Issue 6, pp. 45-49.