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Don Schlesinger: Re: Not necessarily
> From the calculation below, the edge is
> roughly 60%. Given the huge bet size, the
> certainty equivalent may well be close to
> zero for reasonable risk aversion
> coefficients and reasonable wealth size.
"Reasonable wealth" meaning not so much, right?
> For example, with probability of winning of
> 80% (edge 60%), bet size of 5% of total
> wealth, and risk aversion $p=30$ (based on
> total investment wealth, thus not too risk
> averse),
What does "$p=30$" mean???
> the certainty equivalent is already
> negative 5.27%. Thus, the player would be
> willing to PAY in order to avoid such a bet
Send him to me! I'll gladly accept the wager, at even money, with 4 to 1 odds in my favor, for $15,000.
Don
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