I don't know anything about "expected value". I am moderately good in combinatorics, but I never heard this term before today. Like I have got 6 coins numbered a, b, c, d, e & f; and I pick up a coin randomly, what is the expected value (I mean a to f) of the coin?. Can anyone help me?

## Comments

Sort by:

TopNewestLog in to reply

Expected Raffle ValueProblem – Rushikesh Jogdand · 4 years, 1 month agoLog in to reply

– Sambit Senapati · 4 years, 1 month ago

Thanks a lot. I had a misconception that expected value referred to the outcome having highest probability.Log in to reply

– Joseph Gomes · 4 years, 1 month ago

X=46; Y=91. I would choose the 5-envelope version, because there is more chance of getting the envelope with more money when the number of envelopes is smaller. My explanation is probably wrong, you are requested to solve the last part of your problem.Log in to reply

Log in to reply

Your statement "larger chance of seeing a net gain or net loss" is not true, and doesn't follow from simply knowing about the variance. \(P(X \neq 0 ) \) is not influence by the variance. It is easily to construct games with a higher variance but a low probability of change in outcome (e.g. the game that with probability \( \frac{1}{N} \), pays out \(M\), with probability \( \frac {1}{N} \) pays out \(- M\) and with probability \( 1 - \frac {2}{N} \) pays out \(0\). has a high variance as M increases, but a low chance of seeing a net gain or net loss, especially as we increase \(N\).)

Your statement on 'ruin probability' is also not necessarily true. Variance is independent of direction of movement. As a counter example, consider the 10-envelope game where 7 of them give you 1, 2 of them give you 10 and 1 of them gives you 73. Then, this has a higher variance then your 5-envelope game (with \(X=46\)) (453.6 against 324). However, the probability of ruin in bounded below by the probability of ruin in the 5-envelope game.

It is a peeve of mine that people have overly simplified all risk to just a few numbers (expected value and variance), and they do not understand the actual / valid implications, or even the real implications. Another example of a misleading statistic is the "Value at Risk" measure, which failed to account for compounding events, leading to the current financial crisis. – Calvin Lin Staff · 4 years, 1 month ago

Log in to reply

– Joseph Gomes · 4 years, 1 month ago

Thank you, with the help of your explanation I have solved the Expected Raffle Value problem of this week.Log in to reply

I solved the Expected Raffles Value problem using this method. – Soham Dibyachintan · 4 years, 1 month ago

Log in to reply