Originally Posted by Chief_Wiggum:
“Ted Cruz did well in the end!
My odds may have been wrong again but my prediction was pretty sound.”
A two horse race is relatively easy to price up to over 100%.
The underdog's price is just the favourite's price the other way round, less a bit for a profit margin.
For example, if the favourite is 1/2, the underdog cannot be bigger than 2/1, otherwise you are betting to a percentage less than a hundred, or "overbroke" in bookie speak. A punter could bet both runners with you and be guaranteed a profit.
The bookie then factors in a profit percentage and takes a bit out of both the prices as his edge.
For example suppose the bookie thinks that in a two horse race, Dobbin has a 60% chance of winning, and Nobby 40%, that would translate as 4/6 and 6/4. But this would leave him with no theoretical profit margin. So he bets 8/13 Dobbin and 6/5 Nobby. Each price is a little bit less than the true chance. Bookies (and some punters) know automatically what the other side of the price is, they don't need to calculate it. For example if the favourite is 2/5, the underdog is 7/4.
You can find more on this on t'internetty if you're interested.