Question
If the payoff of a number game is as follows, what do you think is the fair price of the game that you will be
If the payoff of a number game is as follows, what do you think is the fair price of the game that you will be charged by playing the game?
| State (number you get ) | Probability | Payoff |
| 1 | 1/5 | -17 |
| 2 | 1/5 | -7 |
| 3 | 1/5 | 2 |
| 4 | 1/5 | 16 |
| 5 | 1/5 | 33 |
hint: the fair price of the game is the price that makes the expected payoff of the game go to zero
If the payoff of a number game is as follows, what do you think is the fair price of the game that you will be charged by playing the game?
| State (number you get ) | Probability | Payoff |
| 1 | 1/5 | -17 |
| 2 | 1/5 | -7 |
| 3 | 1/5 | 2 |
| 4 | 1/5 | 16 |
| 5 | 1/5 | 33 |
hint: the fair price of the game is the price that makes the expected payoff of the game go to zero
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Handbook Of Heavy Tailed Distributions In Finance
Authors: S.T Rachev
1st Edition
0444508961, 9780444508966
