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> Where exactly on which exact bell curve does gambling stop and insurance start? That's not the difference. The difference is that in gambling, you accept a l
by pdonis 2y ago
> Where exactly on which exact bell curve does gambling stop and insurance start?
That's not the difference. The difference is that in gambling, you accept a large variance in payoff, whereas in insurance, you don't; you transfer that risk to someone else.
- adw 2y agoIn gambling you pay someone to take risk for you. In insurance you pay someone to take risk for you. They are the same tool; we just give it a different name when we’re hedging from when we’re speculating.
- pdonis 2y ago> In gambling you pay someone to take risk for you. No, you don't, you take the risk yourself. You're certainly not paying the casino to take risks for you; you're paying them for the privilege of you taking risks (and losing on average) by playing their games.
- adw 2y agoYou’re paying them to take the higher variance end of a swap. That is exactly the same transaction as insurance, complete with the same pricing model.