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Concept
Expected value
Summary
In probability theory, the expected value (also called expectation, expectancy, expectation operator, mathematical expectation, mean, average, or first moment) is a generalization of the weighted average. Informally, the expected value is the arithmetic mean of a large number of independently selected outcomes of a random variable.
The expected value of a random variable with a finite number of outcomes is a weighted average of all possible outcomes. In the case of a continuum of possible outcomes, the expectation is defined by integration. In the axiomatic foundation for probability provided by measure theory, the expectation is given by Lebesgue integration.
The expected value of a random variable X is often denoted by E(X), E[X], or EX, with E also often stylized as E or
The idea of the expected value originated in the middle of the 17th century from the study of the so-called problem of points, which seeks to divide the stakes in a fair way between two players, who have to end their game before it is properly finished. This problem had been debated for centuries. Many conflicting proposals and solutions had been suggested over the years when it was posed to Blaise Pascal by French writer and amateur mathematician Chevalier de Méré in 1654. Méré claimed that this problem couldn't be solved and that it showed just how flawed mathematics was when it came to its application to the real world. Pascal, being a mathematician, was provoked and determined to solve the problem once and for all.
He began to discuss the problem in the famous series of letters to Pierre de Fermat. Soon enough, they both independently came up with a solution. They solved the problem in different computational ways, but their results were identical because their computations were based on the same fundamental principle. The principle is that the value of a future gain should be directly proportional to the chance of getting it. This principle seemed to have come naturally to both of them.
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