Expected Value


DEFINITION of 'Expected Value'

Anticipated value for a given investment. In statistics and probability analysis, expected value is calculated by multiplying each of the possible outcomes by the likelihood that each outcome will occur, and summing all of those values. By calculating expected values, investors can choose the scenario that is most likely to give them their desired outcome.

BREAKING DOWN 'Expected Value'

Scenario analysis is one technique for calculating the expected value of an investment opportunity. It uses estimated probabilities with multivariate models, to examine possible outcomes for a proposed investment. Scenario analysis also helps investors determine whether they are taking on an appropriate level of risk, given the likely outcome of the investment.

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  3. Extrinsic Value

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  4. Intrinsic Value

    Intrinsic value is the actual value of a company or an asset ...
  5. Scenario Analysis

    The process of estimating the expected value of a portfolio after ...
  6. Contagion

    The spread of market changes or disturbances from one region ...
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