Hedging the Grand Finals

You want a payoff of exactly +$800 +\$800 if Team Nova wins its best-of-seven grand finals (first to 4 4 match wins) and exactly −$800 -\$800 if Nova loses the series. The only instrument available is a bookmaker who takes even-money bets on individual matches, sized however you like, placed before each match. How much do you bet on match 1, and how should your bet sizes evolve as the series score changes?

Answer

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