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How to calculate Expected payoff

The Expected payoff formula, with plain worked examples you can check yourself.

Expected payoff = p × G − (1 − p) × L

Worked examples

p = 75% · G = 400 · L = 200Expected payoff = 250
p = 25% · G = 1000 · L = 200Expected payoff = 100
p = 80% · G = 1000 · L = 100Expected payoff = 780

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Investing & Returns.

Related terms

DividendBondHedgingArbitrageLeverageAsset allocation

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