Basic principles of gambling theory

The outcome of a bet can only depend on luck. For mathematicians, the outcome depends on the difference between expected and actual values.

Probabilities Defined

Italian physician and mathematician Gerolamo Cardano was the first to work on probability theory in the mid-15th century. After his death, his work Liber de ludo aleae was published, in which he discusses the game of dice. The result of the game was supposed to be navigation in a space of choice of possible events. For example, two dice can produce 36 different combinations, but only one of them will produce two sixes. The implication is that the mathematical models explored over the years offer interesting possibilities for tipping the scales on one’s side.

Events that occur in gambling have absolute probabilities that depend on the total number of possible outcomes or choice spaces. For example, in a dice game, the selection space is 6, and the probability that the die will fall on any of the six sides is the same.

Expected value

Expected value is the sum of all possible probabilities multiplied by the associated gains or losses. It is a very important concept because it can basically tell you how much money you can expect to win or lose. For example, if you flip a coin, you have a 50/50 chance of winning and therefore the expected value is 0.

Volatility Index

The volatility index is a technical term for a type of deviation that indicates the possibility of obtaining a value greater or less than the expected value. Games with high volatility exhibit very significant differences between expected and actual outcomes.