Vigorish

Vigorish (also called the cut, the house edge, juice, the margin, the take, under-juice, or the vig) is the fee charged by a bookmaker for accepting a gambler's wager. In American English, it can also refer to the interest owed to a loanshark in consideration for credit. The term came to English usage via Yiddish slang ( ) which was itself a loanword from Russian ( ). As a business practice, charging the vig is an example of risk management; it guarantees the bookmaker a profit regardless of the underlying event's outcome. As a rule, bookmakers do not want to have a financial interest creating a preference for one result over another in any given sporting event. This is accomplished by incentivizing their clientele to wager offsetting amounts on all potential outcomes of the event. The normal method by which this is achieved is by adjusting the payouts for each outcome (collectively called the line) as imbalances of total amounts wagered between them occur. Within the mathematical disciplines of probability and statistics this is analogous to an overround, though the two are not synonymous but are related by the connecting formulae below. Over round occurs when the sum of the implied probabilities for all possible event results is above 100%, whereas the vigorish is the bookmaker's percentage profit on the total stakes made on the event.…

Vigorish (also called the cut, the house edge, juice, the margin, the take, under-juice, or the vig) is the fee charged by a bookmaker for accepting a gambler's wager. In American English, it can also refer to the interest owed to a loanshark in consideration for credit. The term came to English usage via Yiddish slang ( ) which was itself a loanword from Russian ( ). As a business practice, charging the vig is an example of risk management; it guarantees the bookmaker a profit regardless of the underlying event's outcome. As a rule, bookmakers do not want to have a financial interest creating a preference for one result over another in any given sporting event. This is accomplished by incentivizing their clientele to wager offsetting amounts on all potential outcomes of the event. The normal method by which this is achieved is by adjusting the payouts for each outcome (collectively called the line) as imbalances of total amounts wagered between them occur. Within the mathematical disciplines of probability and statistics this is analogous to an overround, though the two are not synonymous but are related by the connecting formulae below. Over round occurs when the sum of the implied probabilities for all possible event results is above 100%, whereas the vigorish is the bookmaker's percentage profit on the total stakes made on the event. For example, an overround of 20% results in 16. % vigorish. The connecting formulae are v = \frac{o}{1 + o} \quad \text{and} \quad o = \frac{v}{1 - v}, where represents vigorish, and represents over round. v = 100\left(1 - \frac{pq}{p + q}\right), where the p and q are the decimal payouts for each outcome. This should not be confused with the percentage a bettor pays due to vigorish. No consistent definition of the percentage a bettor pays due to vigorish can be made without first defining the bettor's behavior under juiced odds and assuming a win-percentage for the bettor. These factors are discussed under the debate section. For example, 1. /2.00 pricing of an even match is 4.55% vigorish, and 1.95/1.95 pricing is 2.38% vigorish. Vigorish percentage for three-way events may be calculated using the following formula: v = 100 \cdot \frac{1/p + 1/q + 1/t - 1}{1/p + 1/q + 1/t}, where , and are the decimal payouts for each outcome. For comparison, for over round calculation only the upper part of the equation is used, leading to slightly higher percentage results than the vigorish calculation.

Other uses

In investment banking, "vig" is sometimes used to describe profits from advisory and other activities. In sports, Pittsburgh Pirates announcer Bob Prince coined the term "hidden vigorish" to describe an underdog's ability to beat the odds in a given situation. The term is also used in reference to an auction house's buyers and sellers fees.

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