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Exposition Of A New Theory On The Measurement Of Risk

In: THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE

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  • DANIEL BERNOULLI

Abstract

EVER SINCE mathematicians first began to study the measurement of risk there has been general agreement on the following proposition: Expected values are computed by multiplying each possible gain by the number of ways in which it can occur, and then dividing the sum of these products by the total number of possible cases where, in this theory, the consideration of cases which are all of the same probability is insisted upon. If this rule be accepted, what remains to be done within the framework of this theory amounts to the enumeration of all alternatives, their breakdown into equi-probable cases and, finally, their insertion into corresponding classifications…

Suggested Citation

  • Daniel Bernoulli, 2011. "Exposition Of A New Theory On The Measurement Of Risk," World Scientific Book Chapters, in: Leonard C MacLean & Edward O Thorp & William T Ziemba (ed.), THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 2, pages 11-24, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814293501_0002
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    Citations

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    Cited by:

    1. Brian Knutson & Gregory R Samanez-Larkin & Camelia M Kuhnen, 2011. "Gain and Loss Learning Differentially Contribute to Life Financial Outcomes," PLOS ONE, Public Library of Science, vol. 6(9), pages 1-6, September.
    2. Wei Wang & Francesco Di Maio & Enrico Zio, 2019. "Adversarial Risk Analysis to Allocate Optimal Defense Resources for Protecting Cyber–Physical Systems from Cyber Attacks," Risk Analysis, John Wiley & Sons, vol. 39(12), pages 2766-2785, December.
    3. Chadha, Mayank & Ramancha, Mukesh K. & Vega, Manuel A. & Conte, Joel P. & Todd, Michael D., 2023. "The modeling of risk perception in the use of structural health monitoring information for optimal maintenance decisions," Reliability Engineering and System Safety, Elsevier, vol. 229(C).
    4. Kelly Geyskens & Alexander Grigoriev & Niels Holtrop & Anastasia Nedelko, 2018. "Optimal policy design for the sugar tax," Papers 1810.07243, arXiv.org.
    5. Matej Uhr'in & Gustav v{S}ourek & Ondv{r}ej Hub'av{c}ek & Filip v{Z}elezn'y, 2021. "Optimal sports betting strategies in practice: an experimental review," Papers 2107.08827, arXiv.org.
    6. Jos'e Cl'audio do Nascimento, 2019. "Decision-making and Fuzzy Temporal Logic," Papers 1901.01970, arXiv.org, revised Feb 2019.
    7. Andrea Marchini & Chiara Riganelli & Francesco Diotallevi & Bianca Polenzani, 2021. "Label information and consumer behaviour: evidence on drinking milk sector," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-24, December.

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