3 ms·
When you say "expected value" are you trying to say most likely value?
by socketnaut 6y ago
When you say "expected value" are you trying to say most likely value?
- jaredtn 6y agoNo, I mean the mathematical mean, not mode. If you take this action infinitely many times, what is your average (mean) return? https://en.wikipedia.org/wiki/Expected_value https://en.wikipedia.org/wiki/Expected_value
- socketnaut 6y agoI see, so you're saying the expected profit on the trade is $0 assuming an efficient market and ignoring trading costs? Your comment is confusing the way it's worded because the expected value of the option is non-zero.
- jaredtn 6y agoAh, sorry for that. I meant E[return on option - cost of option] ~= 0.