A simple procedure to practice friendly arbitrage.

In one of the previous posts we had considered the method of friendly arbitrage (see [1]). In this post we consider a simple procedure to practice this method. The table below presents all steps of this procedure. An example also is given below.



Maria is a crypto investor. To have fun with her friends (also crypto investors) Maria suggested that they will be wagering on movements of bitcoin price every week. John, Chris, Barbara and Helen agreed to play this game.


Step 1.

In the morning, Maria calls John, Chris, Barbara and Helen and asks them how bitcoin price will move on the next week. John is an optimist and believes that the price will go up on 10% or more. Helen is a pessimist, she believes that the price of bitcoin will go down on 4% or more on the next week. Barbara also an optimist, she believes that the price will move up on 5% or more. Chris is a pessimist, he believes that the price will move down 1% or more


Step 2. Maria selects John and Helen as the first pair and Barbara and Chris as the second pair.


Step 3. Maria goes to and generates terms for the wagers/bets.



She sends the terms by e-mai to John, Chris, Barbara and Helen and asks them to confirm acceptances of the terms by replying to her e-mails.

Step 4. Maria collects and redistributes rewards according to the terms of the wagers/bets.

By following this procedure, Maria created win-win situations (win for all) and received some reward for herself. As was shown in the examples (see [1]) each participant receives additional value (with respect to the classical deals) according to her/his believes about future outcomes of the event. Scientists call such phenomenon -synergy.


In the next post we consider simple ways to make probabilistic forecasts.



[1] A simple way to make money by means of friendly arbitrage 


[2] A simple way to introduce cashbacks/rebates into friendly arbitrage



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