Simulated Race Modelling (SRM), used to pinpoint value in win and place markets, essentially considers:
1) how likely it is that each runner will run to a certain rating (be it an RPR, a speed rating, or a rating of your own creation),
2) simulating a huge number of renewals based on that information,
3) calculating “fair odds” based on the proportion of times that each horse wins or places in all simulated renewals.
Like all analyses, the usefulness of this technique depends on the accuracy and quality of the data being pumped into the model. From a theoretical perspective, however, the logic behind it is very sound because the data takes into account the ability (individual ratings) and consistency (variation in ratings) of each runner, and the huge number of simulations provide very robust predictions on the likelihood of each runner producing different levels of performance.