No-Vig Probability Interview Intuition
No-vig probability interview intuition for normalizing implied probabilities when quoted prices include margin or overround.
Candidates discussing betting odds, quoted prices, and market-maker margin in interviews.
Overround means probabilities add above one
When quoted odds include margin, the raw implied probabilities across all outcomes can sum to more than 100 percent. That excess is often called overround in betting examples.
Normalize to remove the margin
A simple no-vig estimate divides each raw implied probability by the total raw implied probability across the outcome set.
Concrete example
If two raw implied probabilities are 55 percent and 55 percent, their total is 110 percent. Normalizing gives 50 percent and 50 percent before any other modeling assumptions.
Use as a fair-probability approximation
No-vig probability is a cleaner benchmark than the raw quote when the prompt explicitly asks you to remove margin. It is still an approximation, not a known truth.
Connect to expected value
After estimating no-vig probability, compare it with your own probability estimate and the available price to reason about expected value.
Common mistakes
Candidates sometimes subtract the excess margin evenly without checking the outcome structure. Normalization is the usual toy-interview method when no other method is specified.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.