Probability and Expected Value

Probability

The mathematical likelihood of different outcomes for an event (to convert into a percent, multiple by 100)

equation for the p(outcome)

number of independent result that are outcomes / number of possible outcomes

mutually exclusive

it is impossible for both outcomes to happen, to calculate add the probability of each outcome

OR vs AND

refers to the rules for calculating probabilities when considering multiple events; 'OR' indicates addition, while 'AND' indicates multiplication.

Gambler’s Fallacy

the belief that past independent events affect the probabilities of future independent events, often seen in betting scenarios. H

Hot-Hands Fallacy

the belief that a person or team on a winning streak is more likely to continue winning, despite the independence of events.

Expected value

is a calculated average outcome of a random variable, accounting for all possible values and their likelihoods

EV = (value of outcome1)* (p(o1) +

(value of outcome2)* (p(o2)

Positive vs Negative EV

Positive EV’s are in your favor, do not bet if there is a negative EV