Vigorish (also known as juice, under-juice, the cut, the take, the margin, the house edge or the vig) is the fee charged by a bookmaker for accepting a gambler's wager.
[1][2] As a business practice it is an example of risk management; by doing so bookmakers can guarantee turning a profit regardless of the underlying event's outcome.
The normal method by which this is achieved is by adjusting the payouts for each outcome (collectively called the line) as imbalances of total amounts wagered between them occur.
Within the mathematical disciplines of probability and statistics this is analogous to an overround,[3] though the two are not synonymous but are related by the connecting formulae below.
In the context of betting, two individuals may choose to place a wager on opposite outcomes of an event, agreeing on "fair odds" or evens.
This direct betting approach implies that both parties accept the counterparty risk, acknowledging the possibility that the losing party may not honor the payment upon the event's conclusion, a risk typically mitigated by a bookmaker through the payment of vigorish.
Vigorish percentage for three-way events may be calculated using the following formula:[5] where p, q and t are the decimal payouts for each outcome.