The articles that are devoted to probability in gambling and betting. The topics include: the difference between probability and luck, winning chances, common myths and mistakes players make when assessing the probability, expected return etc. Clearly illustrated on simple examples.
The theory of probability is essential for a proper evaluation of individual wagers of various casino or gambling games. We will get familiarized with the definitions of gambling games, luck, investment and calculation of probability.
Let us have a look at common myths and mistakes that players of casino games make when assessing probability and let us also find out why it is necessary to beware of rash or seemingly clear conclusions.
To find out the House Edge, we need to compare the two things – true odds and a payout ratio. While the payout is quite clear, because it is simply quoted by a casino, true odds need to be calculated on the basis of the probability theory.
The expected value (EV) is a powerful tool to determine a house advantage (in other words a player's disadvantage) of any wager in any casino game, but it is also essential for mathematically perfect play of Poker.
Let us follow another example of how the expected value can be used – this time in business. We will be able to make a qualified choice between two products (that we can manufacture) based on the expected return and associated risk.
The use of expected value in investments. We will pick up a few stocks and demonstrate the calculation of the expected return and risk for both individual stocks and portfolio.
The old (17th century) and one of the most famous probability puzzles of two dice games of the Renaissance gambler Chevalier de Mere. The solution was discovered by no-one else but Blaise Pascal.
Two beagles is a remarkable probability puzzle by Marilyn von Savant, a woman with the highest IQ in the world (218 points) who is written down in the Guinness Book of Records. She often contributes with similar probability riddles to a magazine.