What is Implied probability?
Implied probability is the chance of an outcome suggested by its betting odds, calculated as 1 divided by the decimal odds and usually expressed as a percentage.
Decimal odds of 2.00 imply 50%, odds of 4.00 imply 25%, and fractional odds of 5/1, equivalent to 6.00, imply about 16.7%. Comparing implied probability with one's own estimate of the true chance is the basis of value betting.
Because bookmakers build a margin into their prices, the implied probabilities across all outcomes in a market add up to more than 100%. That excess is the overround.
Implied probability is also used in reporting on prediction markets, where contract prices are often quoted directly as probabilities, such as a contract trading at 62 cents implying a 62% chance. To estimate a bookmaker's view of the true chance, analysts often scale the implied probabilities so they add up to 100%. Even then, prices reflect both the bookmaker's assessment and the way money has been bet. Implied probabilities from exchanges and prediction markets are widely quoted in political coverage.