Introduction to Parimutuel Matching

This chapter introduces the main features of parimutuel matching. Parimutuel matching has been used successfully for over 100 years for wagering on horse races, and it has been in use in the derivatives markets since October 2002. This chapter describes parimutuel matching in its simplest form, because doing so allows us to introduce most of the main features of parimutuel matching without too much detailed mathematics and notation. We defer the more detailed mathematics of parimutuel matching to the later chapters in this book.