Expectation
Expectation is the average (mean) value of a random variable. In layman's terms, it is the amount you can "expect" to win (or lose) based on the total amount of money you bet. Its mathematical symbol is E(X).For a "discrete variable," the formula is:
There are two kinds of formulas to calculate expectation.
Let's say we wish to determine the expectation for a game where 49% of the time we have a 55% chance of winning, and a 45% chance of losing 51% of the time. We can state this mathematically as follows: E(X) = .49*(0.55) + .51*(-.45) = 0.2695 - 0.2295 = 0.04 This means we expect to win 4 cents for every dollar we bet.
To be posted when a good example presents itself.