The Kolkata Auction: Not Another March Mad Group

If you are a huge sports fan, a fairly serious gamer, or work in some aspect of high finance, you may have heard your friends or co-workers speak of the term “Kolkata auction”, especially if it is close to “March Madness”. time (I first came across the Calcutta auction during my years as an analyst in I-banking). What the hell are they talking about, you ask? Simply put, a Kolkata auction is any auction that takes place in the Indian city of Kolkata. It’s a joke! (well, more or less because it IS technically a correct definition). In the world of sports gambling, Calcutta auctions generally refer to a gaming group where participants “buy” equipment (players, horses, etc.) in an auction-style format (I do not approve of games of random with real money. Principal in this article refers to imaginary funds, or “points”). The easiest way to describe and understand this is to look at today’s most common example: the men’s college basketball tournament. Here is a very short description:

1. The time and place of the auction are selected.

2. Since there are 64 teams (I know, I know … 65 with the entry game), there will be 64 teams up for auction.

3. Teams go up for auction in random order.

4. Entrants begin bidding on the team that is currently in the auction block. For an entrant to “own” a particular team, they must be the highest bidder at the end of the bidding round.

5. There is no limit to the amount of equipment a bidder can purchase.

6. The number of games a team wins in the tournament determines the percentage of the pot awarded to the owner (first round winnings are worth a much lesser% of the total pot than subsequent round winnings)

That’s basically it for auction semantics. Sounds simple right? Well, in theory it is, in reality, however, Calcutta auctions are very complex and involve a lot of valuation work (which is why it is so popular with investment bankers, hedge fund analysts, P / E, attorneys and anyone else involved in evaluation work). If a Calcutta-style auction sounds interesting to you, read on.

A detailed description of Calcutta auctions

Now that you know the basics of a Kolkata auction, let’s dive a little deeper. I’ll present this example using a men’s college basketball Calcutta one more time (note that this information is equally applicable to any other sport … professional soccer is a fairly common format for Calcutta as well).

So word has spread that a men’s college basketball is being formed in Kolkata at your office / school / group of friends. If you are interested in participating, the first thing you will need to find out is how big the size of the pool will be (or if you are organizing, how big you want it to be). Estimating the total size of the pool is a critical component to being successful in Kolkata. You don’t want to spend most of your capital on just one team, only to find that that team represents 50% of the total pot. You will also want to determine the% payout for each win in a given round.

For example, if a team you own wins a first round game, it may only be worth 0.5% of the total pot. If they continue to win the championship, that final win can be worth, say, 10% of the pot. It is CRITICALLY IMPORTANT to understand that the total amount you spend on your equipment is not an accurate representation of your capital at risk. This is because the only way you could lose 100% of your capital is if NONE of your teams win a single game, which, if you do your homework, is an incredibly unlikely scenario. If you’re willing to lose a certain amount, you should be willing to spend a decent amount more than that on your equipment.

The next and most important step is to do some research on the teams you will be bidding on. How people approach this step varies greatly. Some people trust a “hunch”. Others go with team loyalty, for example I went to School X therefore I HAVE to own them or I love the team mascot and want to support their team. The last group of people, and generally the most successful, performs sophisticated statistical analysis using complex Excel models. The last group is able to approach the auction in the most objective way possible, since they aspire to attribute “fair” values ​​to the teams. This is the approach I take and it has proven to be quite successful. Now that you have determined what equipment you would like to have, it is time for the auction.

The auction is generally held in person at a specified time and location. The auction rules should be clearly defined in advance (for example, how to indicate that you want to bid, how long after the last bid do you consider the bid to be closed, etc.) to avoid any conflict. Each team will be auctioned until all are sold (in some auctions, the 13-16 seeds are packaged as a single team). Let’s say you win the teams you wanted. Now what?

Once the auction is over and you have your equipment, most of the hard work is over, but the fun is just beginning. This is what it must feel like to own a professional sports team! You will be supporting the teams you own more strongly than the school you graduated from (or are currently attending, as the case may be). It is a wonder! You will also find yourself updating your accumulated earnings and trying to figure out how much more earnings you need to cover expenses.

If you participate once, you will definitely be hooked!