TY - JOUR T1 - Numeraire Dependence in Risk-Neutral Probabilities of Event Outcomes JF - The Journal of Derivatives SP - 128 LP - 143 DO - 10.3905/jod.2019.26.4.128 VL - 26 IS - 4 AU - Michael Hanke AU - Rolf Poulsen AU - Alex Weissensteiner Y1 - 2019/05/31 UR - https://pm-research.com/content/26/4/128.abstract N2 - For most non-financial events, risk-neutral outcome probabilities are identical across numeraire currencies. Some events, however, such as elections or referendums, may have an impact on exchange rates. This implies numeraire dependence in risk-neutral outcome probabilities, which leads to different state prices for affected currency pairs. If betting odds available to punters do not reflect these differences, this may give rise to (approximate) arbitrage opportunities. Despite the sizable risk this creates, odds quoted by bookmakers seem to ignore this effect.TOPICS: Currency, performance measurement, risk management ER -