What is the 'Expected Value'
The expected value is an anticipated value for a given investment. In statistics and probability analysis, the 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.

Multivariate Model
A popular statistical tool that uses multiple variables to forecast ... 
Outcome Bias
A decision based on the outcome of previous events without regard ... 
Unconditional Probability
The probability that an event will occur, not contingent on any ... 
Scenario Analysis
The process of estimating the expected value of a portfolio after ... 
Average Price
1. A representative measure of a range of prices that is calculated ... 
Relative Value
A method of determining an asset's value that takes into account ...

Fundamental Analysis
Scenario Analysis Provides Glimpse Of Portfolio Potential
This statistical method estimates how far a stock might fall in a worstcase scenario. 
Professionals
Scenario / WhatIf Analysis
We look at some ways that you can evaluate your project. 
Fundamental Analysis
Explaining Expected Return
The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome. 
Options & Futures
Multivariate Models: The Monte Carlo Analysis
This decisionmaking tool integrates the idea that every decision has an impact on overall risk. 
Professionals
Net Present Value (NPV)
FINRA/NASAA Series 66 Section 1  Net Present Value. This section discusses the concept of Net Present Value and its calculation. 
Professionals
Common Probability Distributions
CFA Level 1  Common Probability Distributions  Basics 
Fundamental Analysis
Guide To Excel For Finance: Advanced Calculations
Monte Carlo SimulationIn its most basic form, the Monte Carlo simulation seeks to simulate realworld outcomes by showing a range of outcomes for a given variable set. For example, in the casino ... 
Options & Futures
StockPicking Strategies: Value Investing
Value investing is one of the best known stockpicking methods. In the 1930s, Benjamin Graham and David Dodd, finance professors at Columbia University, laid out what many consider to be the ... 
Forex Education
Time Value Of Money: Determining Your Future Worth
Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation. 
Professionals
Present Value And Discounting
It is important to know how to calculate the time value of money so that you can distinguish between the worth of investments that offer you returns at different times.

What is the difference between book value and market value
Learn the differences between book value and market value, and see how investors use each type to determine if a company ... Read Answer >> 
What is backtesting in Value at Risk (VaR)?
Learn about the value at risk of a portfolio and how backtesting is used to measure the accuracy of value at risk calculations. Read Answer >> 
How do you use a financial calculator to determine present value?
Learn how to utilize a financial calculator to calculate present value. Understand the necessary data, why it is important ... Read Answer >> 
What can cause an asset to trade above its market value?
Learn some of the factors that can affect the price of an investment asset and the major reasons why an asset might trade ... Read Answer >> 
How do investors calculate the present value of a future investment?
Learn what present value is, how to calculate the present value of a future investment, and what formula investors use to ... Read Answer >> 
What is the difference between economic value and market value?
Learn about the differences between economic value and market value. Discover how they serve different purposes for businesses ... Read Answer >>