The Law Dictionary

Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

What is EXPECTED VALUE

(1) The MEAN of a distribution of values that a random variable can take. (2) The value that is obtained given certain possible outcomes and probabilities of occurrence. In financial RISK MANAGEMENT terms this is often summarized as frequency (probability) times severity (outcome), or: where Prob is the probability of occurrence , O1 is outcome 1 and 02 is outcome 2.

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