Odds no doubts are in favour of Arsenal, one main reason for this might be because they are playing at home. In football, result of game may differ with odds and that we have seen so many times. To me both teams are equally capable of winning the first quarter final and it's difficult to predict the winner. Arsenal now out from EPL title contest race after they played a draw against Everton and they have full focus on UCL title now. Both teams have issues regarding player availability due to injuries and suspension, so let's just wait and see who wins the first quarter final.
Given odds by book markers don't guarantee that Arsenal will surely win this match even they are the host. Real Madrid in UEFA Champions League is something really different and many times unexplainable. They can play not impressively and even bad, but still manage to win their opponents in knock-out matches.
Arsenal don't have mentality of a champion that is their biggest weakness when facing with a strong and very experienced opponent like Real Madrid. Playing with their best, full focus during the match will increase chance of having a draw or win for Arsenal. If Arsenal players only lack of focus in several minutes, Real Madrid will not waste those precious minutes to beat Arsenal in England.
I also predict Arsenal will win this match with a narrow score, the reason is because Real Madrid performance in the last 3 matches has only been able to achieve 1 win, 1 draw and 1 loss, they have also conceded 8 goals in those three matches, Madrid has also just lost in the last game in front of their supporters.
My thinking and prediction are different than yours, and I think of a draw or even a defeat for Arsenal. A draw if happens, will make a second leg match more exciting but if Arsenal lose at their home stadium, they will transport to Bernabeu stadium for a second leg match with nearly no hope. In Bernabeu stadium, Real Madrid can destroy Arsenal easily if they already won in a first leg and Arsenal has to play very attacking there.