Join Date: Jul 2014
Posts: 382
Hi, I am reading the MOP book and it says calculate the variance of a coin flip like this :
V = (1/2)(1-1/2)²+(1/2)(0-1)²
V = 1/4
But the previous page it calculates the variance of betting 1$ on a coin flip like this :
V=(1/2)(1-0)²+(1/2)(-1-0)²
V= 1
I understand in the first case the EV is zero, betting 1$ for 1$, in the second case the author seems to just think about variance of coin flip without referring to a bet so says EV is 0,5.
However I feel like the results don't correlate. For example if you flip 100 coins, Ev is 100 coin flip in one case but 25 in the other case.
Does anyone understand this part ? Thank you!
