Expected value is a mathematical concept that represents the average outcome of a probability distribution over multiple trials or events. It is calculated by multiplying each possible outcome by its probability and then summing the results.
In other words, the expected value is the long-term average of a random variable or event. For example, if you toss a fair coin, the expected value of the outcome is (0.5 x 1) + (0.5 x 0) = 0.5, where 1 represents the value of getting heads and 0 represents the value of getting tails. This means that over the long term, you can expect to get heads 50% of the time and tails 50% of the time.
Expected value is used in many areas of finance and economics, such as investment analysis, risk management, and game theory. By calculating the expected value of different outcomes, investors and analysts can make informed decisions about the potential risks and rewards of different investments or strategies.