Implied Probability Versus Your Own Estimate: The Idea Behind Value

Every price on a betting board hides a probability. Odds of 2.50 say the outcome has about a 40% chance, before the bookmaker's margin enters the sum. Value starts when your own estimate differs from that figure. If you rate an outcome more likely than the price implies, the bet shows positive expected value on paper, though only an accurate estimate turns that paper edge into anything real. Below: how to turn odds into implied probability, how to strip out the margin, how expected value works, why estimates go wrong, and how the same idea applies to prediction markets.

Source: Crypto Daily